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Thursday, July 3, 2008

An Updated Summary of the Scandal, Corruption, and Hypocrisy by Barack Obama in Mortgages and Real Estate

From the beginning of the mortgage crisis, Barack Obama's political message was a populist one. In his speeches he stood up for the little guy. Stories like this are a common occurrence during any speech on the mortgage crisis.

Felicitas and Francisco have lived the American Dream. Their story is not one of great wealth or privilege. Instead, it embodies the steady pursuit of simple dreams that has built this country from the bottom up.

Felicitas came to Las Vegas from Arizona. Francisco came from Mexico. And together, in this city of dreams, they built a life founded on hard work and family; patience and perseverance. For two decades, they raised four daughters on a modest but dependable wage – thanks in part to their ability to organize with other workers in the Culinary Union. Today, she works as a maid –and he works as a porter – in the Bellagio, down on the strip.

Like so many working people, their lives have been shaped by sacrifice for their children’s future – the promise that each generation has the ability to reach a little further. And theirs have been lives lived rent check to rent check, with the promise of a home sought through the little savings that they could put aside week after week, month after month, year after year. Finally, three years ago, they were able to reach that destination in their pursuit of the American Dream. After so much hard work, Felicitas and Francisco were able to move into a home of their own.

Yet a predatory loan has turned this source of stability into an anchor of insecurity. Because a lender went for the easy buck, they are left struggling with ballooning interest rates and monthly mortgage payments. Because Washington has failed working people in this country, they are facing foreclosure, and the American Dream they sought for decades risks slipping away.

Obama's strategy has been to portray himself as on the side of the little guy. Furthermore, he demonized the business and blamed the core of the problem on the special interestsmostly the banks being in too tight with the political establishment.

There is a reason why this has happened. Over the past several years, while predatory lenders were driving low-income families into financial ruin, 10 of the country’s largest mortgage lenders were spending more than $185m lobbying Washington to let them get away with it. So if we really want to make sure this never happens again, we need to end the lobbyist-driven politics that made it possible.

In other words, in Obama's view, Washington D.C. had gotten too close to special interests and that relationship corrupted the system at the expense of the little guy.

So, what have we learned about Barack Obama over the last week.

According to this report from the Boston Globe, Barack Obama pushed an idea while he was still in the Illinois State Senate to privatize low income housing. By privatizing these properties, it certainly would become a boon to the developer. Well, not surprisingly, several powerful developers landed lucrative contracts. The most notorious name is Tony Rezko. According to the report, here is what Obama did for developers.

As a state senator, the presumptive Democratic presidential nominee coauthored an Illinois law creating a new pool of tax credits for developers. As a US senator, he pressed for increased federal subsidies. And as a presidential candidate, he has campaigned on a promise to create an Affordable Housing Trust Fund that could give developers an estimated $500 million a year.

Because of a lack of oversight though, here is the kind of shape they have turned into.

About 99 of the units are vacant, many rendered uninhabitable by unfixed problems, such as collapsed roofs and fire damage. Mice scamper through the halls. Battered mailboxes hang open. Sewage backs up into kitchen sinks. In 2006, federal inspectors graded the condition of the complex an 11 on a 100-point scale - a score so bad the buildings now face demolition.

Of course, the developers already made out handsomely. The residents are stuck living in unlivable conditions. Barack Obama should have been watching the money. Instead, he was nowhere to be found.

On a totally other matter, we also learned this week that Barack Obama got his own VIP

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....

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

Obama spokesman Ben LaBolt said the rate was adjusted to account for a competing offer from another lender and other factors. "The Obamas have since had as much as $3 million invested through Northern Trust," he said in a statement.

Now, after taking a look at this deal carefully there is a lot to be suspicious of. First of all, the rate that is quoted sounds outrageously low. Here is how the Washington Post reported on it.

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.

Now, it gets techical from here but it is extremely important to the story. What the article does is the mortgage equivalent of comparing apples to oranges and then makes a faulty identification as such. The article compares the Obama's loan to jumbo loans. Now, the Obama's loan is significantly more risky. Despite this fact, the Obama's loan was still .375% better. That means their deal wasn't merely good but great and bordering on outrageous. The Obama's got 5.625% on a loan amount of $1.32 million even though the average rate on a loan of up to $850k was just below 6%.

Of course, the scandal may just be starting there. Later in the article, the authors said something that even they didn't necessarily think is important however if I am right about it, it might be the key to the story.

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.

In Obama's case, he received a lower rate than the average offered at the time in Chicago for similarly structured jumbo loans. He secured his final mortgage commitment on June 8, 2005, and during that week, rates on similar loans for which information is available averaged 5.93 percent, according to HSH Associates, which surveys lenders. Another survey firm,, placed the average at 6 percent.

The story makes it sound as though they locked the rate in on February 4, 2005 and didn't close until mid June. That means his rate would have been locked in for nearly FIVE months. In mortgages, the standard lock is 30 days. Borrowers can lock in loans longer however rates begin to get worse. Furthermore, past two and three months, banks require an up front fee to hold the loan. By four and a half months, that fee is likely astronomical. It could be up to 3%. Let's just say that Northern Trust normally charges 2% to lock a loan in for that long. That's a savings of $26,400.

Furthermore, the Obama's likely saved about $1000 or more a month in payments not the $300 that the Washington Post estimated. That is a savings of nearly $400k and maybe even more over the life of the loan.

Fianlly, there is a lot of campaign cash going from Northern Trust.

According to FEC records Senator Obama received extensive campaign support from executives and board members of Northern Trust during both his 2004 Senatorial Campaign and this year’s presidential campaign. In 2003, during his bid for the Senate, William Osborn the Chairman of Northern Trust (and director of the Federal Reserve) contributed $1,000 to Obama’s Senatorial campaign followed up by a maximum contribution to the Senators primary campaign.

During Obama’s Senatorial Campaign he also received numerous contributions from Darrell Jackson, The President and CEO of Northern Trusts Illinois West Region (includes Obama’s residence). In addition Barbara Lumpkin (Senior Vice President of NT), Kelly Welsh (Executive VP and General Counsel of NT), and John Bross (a former Vice President of NT) were healthy contributors to Obama’s Senate Pursuits. The most interesting of the contributions that flowed from these executives into Obama’s campaign coffers occurred on May 5th and 6th of 2005 when Bross and Welsh contributed money on consecutive days. The interesting fact of these contributions are that they occurred 6 months after the Senator took office and just 1 month prior to his closing on his Northern Trust Loan. The donations that May of 2005 stand out because there were relatively few contributions to the Obama coffers in 2005, as a result of his election 6 months earlier.

That's not a bad deal I'd say, and I haven't even begun to talk yet about the fact that the house he bought, he got a special discount courtesy of Tony Rezko.

On top of all this, Barack Obama is on record as supporting the corrupt Dodd/Frank.

To stabilize our housing market and to bring this crisis to an end, I’m a strong supporter of Chris Dodd and Barney Frank’s proposal to create a new FHA Housing Security Program. This will provide meaningful incentives for lenders to buy or refinance existing mortgages, and to convert them into stable 30-year fixed mortgages. This is not a windfall for borrowers – as they have to share any capital gain. It’s not a bailout for lenders or investors who gambled recklessly – as they
will take losses. It asks both sides to sacrifice. It offers a responsible and fair way to help Americans who are facing foreclosure to keep their homes at rates they can afford.

This is an equally corrupt bill that proposes to bail the poor out though what it also does is bail out big wig Banks like Countrywide. (This corrupt endeavor will cost the tax payers about $300 billion. It is among the biggest financial scandals I have ever witnessed and even more corrupt is the media's refusal to report on it.) All this bill really does is sell out the tax payers to the tune of $300 billion dollars to bailout well connected banks and irresponsible borrowers.

In other words, Barack Obama is everything that he claims is a problem with the system. Furthermore, he wants to expand the size of government exponentially. If a corrupt individual expands the size of government, he only expands the corruption throughout the society.

What do you think will happen to socialized medicine if it is run and operated by a corrupt individual? Let me give you a preview. Right now, in Pennsylvania DCFS looks the other way while children in their care continue to get abused. In Rhode Island, you find a similar situation.
In South Carolina, the government targets doctors that attempt to report bad medical care. In Texas, the medical board has corrupted the system so that it looks the other way at the same time it helps the insurance companies corrupt the system. The nursing board is no less corrupt. The entire state of Georgia does nothing while one of the biggest public hospitals in the country is systematically corrupted.

This is the sort of corruption going on now by government in medicine and of course I have only scratched the surface on it. If government were to expand in health care, as Obama clearly wants, so would the corruption.

That isn't the only place that Barack Obama wants to expand the size of government. Here is what he would do on jobs.

Democrat Barack Obama said Wednesday that as president he would spend $210 billion to create jobs in construction and environmental industries, as he tried to win over economically struggling voters. Obama's investment would be over 10 years as part of two programs. The larger is $150 billion to create 5 million so-called "green collar" jobs to develop more environmentally friendly energy sources.

Now, $150 billion in new government spending is a boondoggle for corrupt businessmen like Tony Rezko. Corrupt politicians and increased size of government are a dangerous combination. That's what we have with Barack Obama.


Anonymous said...

Looking at the historical fixed rate morgage interest rates show that Feb and June were very similar. There was a rise and fall of the rates in the March, April, May timeframe. So I don't think the extended lock is such a big deal. I'm much more worried about the large contributions from the lender to the campaign from the mortgage company along with the pork barrel low-income housing developments.

mike volpe said...

What the rates wound up being compared to the rates when he locked them is wholly irrelevant because that isn't something the Obama's would have known at the time.

Imagine if someone got below average rates, way below average, and they didn't have to pay for a long term lock others would have to pay multiple points to receive. Now, imagine if that same person makes their living speaking out against exactly that sort of behavior and you have what Barack Obama has done.