In a July 2 article, The Washington Post baselessly suggested that Sen. Barack Obama was given preferential treatment in the interest rate he received on his $1.32 million mortgage from Northern Trust for the purchase of his Chicago home in June 2005. In the headline, the Post asserted: “Obama Got Discount on Home Loan.” The second paragraph asserted: “The freshman Democratic senator received a discount” on the loan. But the article by Post staff writer Joe Stephens did not cite any evidence that the interest rate Obama received was in any way out of the ordinary or in any way the result of preferential treatment. Indeed, in the 21st paragraph of the article, Stephens quoted a vice president of Northern Trust -- the bank from which Obama and his wife Michelle received the mortgage -- saying “the rates offered to Obama were 'consistent with internal Northern Trust rates at that time.' ”

The Los Angeles Times reprinted the Post article with the subhead: “His mortgage rate secured in '05 may add to a debate on whether officials' deals from lenders are illegal gifts.” In fact, the article contained no allegations that Obama had received an “illegal gift[].”

Stephens also reported that “Obama spokesman Ben LaBolt said the rate was adjusted to account for a competing offer from another lender and other factors,” and that "[t]he Obama campaign called the rate 'consistent with Northern Trust policies, and it reflected the base rate set for that period discounted to address the competition for the account and other opportunities, such as personal financial services, that the relationship would bring to Northern Trust.' "

Stephens reported that the Obamas received an interest rate of “5.625 percent on the 30-year fixed-rate mortgage.” Stephens later reported that Obama “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, Bankrate.com, placed the average at 6 percent.” The article continued: " 'It's certainly safe to say that this borrower did better than average,' said Keith Gumbinger, an HSH vice president, noting that consumer rates vary widely. 'It's a good deal.' " But Stephens did not quote Gumbinger or anyone else saying that the mortgage rate the Obamas received constituted a discount from market rates or was the result of anything other than negotiation and bank policy.

Indeed, the very concept of an “average” rate means that a substantial number of loans would have been at interest rates below the average level, as well as a substantial number above that level, and does not suggest that rates below average -- if in fact the Obamas received a below-average rate -- resulted from preferential treatment.

Further, Stephens later noted that the HSH Associates average loan rate figures he cited were for a different type of loan than the one the Obamas received. Stephens reported that the Obamas “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” [emphasis added]. But he added that the Obamas did not receive a “jumbo loan”: “Jumbo loans are for amounts up to $650,000, but the Obamas' $1.32 million loan was so large that few comparables are available.” Stephens stated that the Obamas had received a “super super jumbo” loan.

Commenting on the article on July 2, Politico senior political writer Ben Smith wrote: "[W]hile the GOP is making much of it this morning, it seems well short of the Countrywide story: There's no evidence that [the Obamas] dealt with the bank through a special side door for powerful people like the one Countrywide maintained." Mike Allen, Politico's chief political writer, referred to the story as “padded” and asserted that the Post wasn't “sure it was news”, writing: “The tipoff that this story is padded -- and that they weren't sure it was news -- is that it includes irrelevant quotes about Countrywide, which was not the Obama lender.”

From the July 2 Washington Post article:

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.

Modest adjustments in mortgage rates are common among financial institutions as they compete for business or develop relationships with wealthy families. But amid a national housing crisis, news of discounts offered to Sens. Christopher J. Dodd (D-Conn.), chairman of the banking committee, and Kent Conrad (D-N.D) by another lender, Countrywide Financial, has brought new scrutiny to the practice and has resulted in a preliminary Senate ethics committee inquiry into the Dodd and Conrad loans.

Within Obama's presidential campaign organization, former Fannie Mae chief executive James A. Johnson resigned abruptly as head of the vice presidential search committee after his favorable Countrywide loan became public.

Driving the recent debate is concern that public officials, knowingly or unknowingly, may receive special treatment from lenders and that the discounts could constitute gifts that are prohibited by law.

“The real question is: Were congressmen getting unique treatment that others weren't getting?” associate law professor Adam J. Levitin, a credit specialist at Georgetown University Law Center, said about the Countrywide loans. “Do they do business like that for people who are not congressmen? If they don't, that's a problem.”

Under financial disclosure rules, members of Congress are not obliged to disclose debts owed to financial institutions for personal residences. Names of lenders and rates paid on mortgages sometimes can be determined by scrutinizing property transaction records. In March, in response to media questions, Obama posted on his campaign Web site records related to his house purchase.

Last week, during debate on a bill to help homeowners caught in the foreclosure crisis, some members of the Senate ethics committee proposed an amendment to require that lawmakers disclose their mortgage lenders and loan terms in annual financial forms starting next year.

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, Bankrate.com, placed the average at 6 percent.

“It's certainly safe to say that this borrower did better than average,” said Keith Gumbinger, an HSH vice president, noting that consumer rates vary widely. “It's a good deal.”

The Obama campaign called the rate “consistent with Northern Trust policies, and it reflected the base rate set for that period discounted to address the competition for the account and other opportunities, such as personal financial services, that the relationship would bring to Northern Trust.”

[...]

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.

Obama's Republican opponent, Sen. John McCain, has no mortgages on properties he owns with his wife, Cindy, who is a multimillionaire.

Unlike Countrywide, where leaked internal e-mails documented a special discount program for friends of chief executive Angelo Mozilo, Northern Trust says it has no formal program to provide discounts to public officials. Loan officers may consider a borrower's occupation when establishing an interest rate, the bank said.

“A person's occupation and salary are two factors; I would expect those are two things we would take into consideration,” said Northern Trust Vice President John O'Connell. “That would apply to anyone seeking to get a mortgage at Northern Trust.” He added that the rates offered to Obama were “consistent with internal Northern Trust rates at that time.”

“The bottom line is, this was a business proposition for us,” he said. “Our business model is to service and pursue successful individuals, families and institutions.”