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July 01, 2008 The Obamas and their Mortgage (updated)By Richard Henry LeeThe Obamas purchased their home with the help of his friend Tony Rezko, recently convicted of a felony. His wife Rita purchased the adjoining lot, the former side yard of the mansion, to seal the deal. According to the mortgage documents which his campaign released, the Obamas obtained a $1.32 million mortgage from Northern Trust. The Politico recently asked 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. 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 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. Where's the Interest? There is a one million dollar limit on deductability for home mortgage payments, as commenter Phil Nesbit points out below. It would appear that the Obamas are rich enough to be caught up in the "soak the rich" provision of the tax code. It has cost them money, unless they have managed to pay down their mortgage. 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. They have apparently not been able to deduct the excess. 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. Beyond the question of the mortgage payments, odd coincidences and connections surround the house purchase, beyond questions already raised by the handling of the mansion's side yard, which was legally divided by the previous owner into a separate lot, and sold to Tony Rezko's wife Rita Rezko at the same time the Obamas purchased the house adjoining the yard. If nothing else, these connections illustrate how deeply the Obamas' personal and financial lives are enmeshed in the world of Tony Rezko and the Chicago political machine. Multiple coincidences Obama's lawyer in the transaction, William Miceli, in all likelihood did legal work for Tony Rezko also. Obama used a trust account through Northern Trust to purchase the home. His attorney, William Miceli, signed the real estate documents on behalf of the trust. The same William Miceli was a sometime supervisor of Obama when Obama worked at the law firm of Davis Miner Barnhill & Galland. This firm also did some work for Tony Rezko's firm Rezmar, which has developed some projects that turned out to be disasters. Miceli specializes in urban renewal land deals. Rezmar, of course, participated in numerous deals of this kind, including a deal with Allison Davis of the firm. Rezko also arranged to get Davis appointed by Gov. Blagojevich to the Illinois State Board of Investment. Davis has since left the law firm. The house purchased by the Obamas had been gutted and renovated 6 years earlier by a former employee of Tony Rezko. At the time the Obamas became interested in the house, someone else had already obtained an option on the side yard lot. By sheer coincidence, Tony Rezko knew that person, and arranged for the option to remain unexercised when the Obamas purchased the home, leaving the side yard in the friendly hands of the crooked Chicago real estate wheeler-dealer's wife. Northern Trust and Kelly King Dibble The Obamas got their mortgage from Northern Trust. By curious coincidence, one of Michelle's old friends joined that bank and is now in a particularly important position when it comes to information about the mortgage. Kelly King Dibble has a long time friendship with Michelle Obama from the time they both worked at the Chicago Planning Dept, and she also worked for Rezko. Dibble went on to head the Illinois Housing Development Authority under Governor Blagojevich, with Rezko help. Dibble also hosted a fund raiser for Obama. More on Dibble here. Dibble also was mentioned during the Rezko trial by Ali Ata. Dibble was a regular visitor to Rezko's office while heading the IHDA (which is based in Chicago). She also crossed Rezko when she refused to hire a Rezko relative. Dibble later resigned from the IHDA in Jan 2007 to take a job with Northern Trust, and is now Senior Vice President Public Affairs. So if Northern Trust is asked about the loan, Dibble will be in charge of framing the answers. I have often wondered what role Dibble might have played in Obama's house deal, since she was chummy with Michelle and Michelle was probably doing most of the house search. Did Dibble tell Rezko about the Obamas' housing search? Was she also involved with the Northern Trust deal? (Although she still headed the IHDA at the time, she might have had contacts at Northern Trust to get such a plum job there later). The media have focused on the Obama-Rezko connection, but I wonder how much Michelle was involved? She seems to have run the household, is a Harvard-trained lawyer, and she is no shrinking violet. Her father was a Democrat precinct captain so she is no stranger to the ways of Chicago politics. There may only be smoke, no fire, in the Obamas' mortgage transaction. But they certainly had a lot of help from a lot of friends of Tony Rezko. Richard Henry Lee is the pseudonym of a retired Illinois state employee.
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Comments
Obama said that his transaction with Tiny Rezko was 'bone-headed'. But did you know that a British-Iraqi billionaire, Nadhmi Auchi, who is said to have had connections with Saddam Hussein and who was convicted for corruption in France, lent millions of dollars to Rezko just weeks before that 'bone-headed' land deal.
And that Rezko's connections with the Nation of Islam are strong. Reszko, born in Syria, was a business associate of Jabir Herbert Muhammad, the son of the founder of the Nation of Islam, Elijah Muhammad, serving as a vice president and general manager of JHM's firm Crucial Inc. And finally, Rezko was bailed from jail by Ali Baghdadi, the 'Middle East adviser' to the Nation of Islam. Multiple coincidences indeed!!!
Posted by: Mike Malkovitch | July 1, 2008 03:14 AM
There is a $1mm mortgage cap on interest deductions. This may explain why the deductions are less than the expected interest payments.
Posted by: Phil Nisbet | July 1, 2008 08:43 AM
You may know that there is a book that just was released and it is "last Patriot standing" There may be a lot of explanation for the Obama campaign to even exist, there is a concerted effort to take over this country from with in, according to this book , the author Steven Thur. I think I am right on that but I may have misspelled the name . People better wake up because we may be turning our country over to Islam.
Posted by: Ken Roberts | July 1, 2008 09:07 AM
Voting for Obama and the Marxism he brings is bone-headed.
Posted by: bill-tb | July 1, 2008 09:19 AM
The pseudonym for this exceptional article is well chosen. Thank you, Mr. Lee, whoever you are.
Posted by: LDC | July 1, 2008 09:22 AM
The second mortgage may, as you indicate, be a line of credit. It is very possible that only a small portion, or non at all, has been utilized. It could be there for emergency purposes. If so, this was smart financing.
Posted by: Bob Beales | July 1, 2008 09:29 AM
This is a waste of time, no amount of corruption will sway the masses from the Messiah. He could have met with Satan himself and nothing would change. The media minions and parrots will ignore any level of heresy as long as we get a Marxist for president.
Unless McCain is willing to show distinct ideological differences then Obama will win.
This is not David and Goliath. This is Mr. Bill in Sluggoville.
Posted by: DaveT | July 1, 2008 10:21 AM
Taxpayers are allowed to deduct interest expense relative to $1,100,000 of home mortgage indebtedness (including 2nd homes). This means for those who have home mortgages (on 1st and 2nd homes combined) in excess of $1.1 million, they are limited in their deductiona and an apportionment is required.
In the case of the Obamas, the numerator of the apportionment fraction would be $1,100,000 and the denominator would be $1,320,000. This fraction is then multiplied by the entire annual interest expense on the $1.32M loan, e.g., $73,395 for 2006. This produces deductible interest expenses of $61,163 for 2006...pretty darn close to what was deducted on their 2006 tax return, viz., $60,449.
Posted by: Alan Fraser | July 1, 2008 11:30 AM
Don't hold your breath waiting for SIXTY MINUTES to investigate.
Posted by: Increase Mather | July 1, 2008 11:57 AM
Everyone ask who is behind Obama. We know Resko and other Cook county politicians have been supporting Obama, but who are the major power players behind him? I know the Chicago Tribune has run a positive Obama article at least once a day in their newspaper for the past 5 years. There is a powerful and rich group of supporters in Chicago that is behind Obama. How come no one does an investigative report on who the power brokers are behind Obama??? Is the Daley family involved? Is Sam Zell involved? Who exactly are the players? Where is Time magazine?
Posted by: Rightnews | July 1, 2008 02:36 PM
The governor of Arkansas was caught up in the Whitewater / S&L scandal. Jim and Susan McDougal were as well. None of it touched Bill Clinton. Obama will get the same soft treatment. A "D" after your name goes a long way.
Posted by: pmk | July 1, 2008 05:18 PM
I don't understand how Democrats can do "criminal" acts and get a pass but a Republican gets crucified. If Obama gets in, again, it tells how uneducated and uncaring Americans are in this day and age. Where are the Americans that will stand up for our constitutional Republic against Marxism?
Posted by: Darrell G. | July 1, 2008 09:52 PM
Lets forget about the mortgage. It may be a very good rate but its within the ballpark as they say for such a mortgage.
Lets look at the property taxes he is paying on a Chicago home. Chicago does not have Proposition 13 limitations that limit real estate taxes to 1% of the purchased value of the real estate and allows a 2% annual increase.
However, Sen. Obama is paying property taxes of only 22K on his 1.7 million dollar home. That appears very low for Chicago.
Posted by: David | July 2, 2008 08:49 AM
I do like how american politics has been reduced to this sort of demagoguery. If you identify as republican or democrat then opposition are the most venial individuals on the planet, and their perfidy knows no bounds, however if they have the self identify with the same tribal group as you, then they are misunderstood and are being persecuted. I don't see the howls of and catcalls when "conservatives" blantantly admit to breaking the law or are even caught red handed.
But then i forget if you disagree then you are obviously a marxist.
Posted by: RomanX | July 2, 2008 10:20 AM
RomanX misses the point: Obama has become rich in a very short time while engaged in public service, and he owes it all to a very unsavory character.
Posted by: John Schuh | July 2, 2008 12:25 PM
There is also an interesting story to be told about connections between Bill Ayres, his father and the Daley family. I've seen glimpses of it but the whole story would be a nice complement to the Obama story. Chicago's radicals.
Posted by: Mike K | July 2, 2008 05:46 PM
I think that all of you are missing a very important point. One house, two lots. Is the remainder of the subdivide lot still big enough to put a house on without a variance of the building code? If not, then the lot has little market value. It costs money in taxes and isurance to keep it and it cannot be sold as the only interested buyers would be Obama and the neighbor on the other side of the lot.
If this is true, then Obama efectively bought the whole lot for a SMALL fraction of the original full purchase price and Rezco took a bath, intentionally. Seems like a big transfer of wealth to me. Quid pro quo anyone?
Posted by: punslinger | July 2, 2008 11:57 PM
PDOP published an interesting article last night pointing out the ties that existed between Obama & Northern Trust Board members and Execs prior to his mortgage. http://politicallydrunk.blogspot.com/2008/07/obamas-mortgage-mess-deeper-than-first.html
Posted by: Mindy L | July 3, 2008 07:33 AM
It is well-known that democrat voters expect next to nothing from the people they vote for; but expect much more from republicans "because republicans are supposed to keep their promises; they claim to have higher morals" while democrats do not. This is only offered because I hear them say these things, not because I understand it.
Posted by: Buddy | July 4, 2008 09:28 PM