The Obamas and their Mortgage (updated)

Sweetheart mortgage loans to Senators are much in the news of late, with calls for increased scrutiny of the solons' dealings with their mortgage lenders. In this spirit, I took a look at some of the publicly available information on Senator and Mrs. Obama's mortgage, obtained in 2005 when they purchased their mansion in Chicago's upscale Hyde Park district.

The 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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