As mortgage foreclosure rates hit record highs, one small group of homeowners remains relatively immune to the pressures confronting millions of other Americans: those at the highest levels of the Obama administration.
At least seven top officials—as well as the president himself—have reaped the benefits of mortgage deals ranging from discounted rates to reduced and subsidized mortgages to free housing, largely due to their stature or as perks of previous employment.
To be sure, neither Obama nor any of his appointees have been found to have acted improperly in securing mortgages or housing, and many likely have mortgage terms that will seem familiar to many average homeowners.
But in most cases the deals or housing arrangements were of a kind that are unavailable to most Americans, a happenstance that reveals more about how the political class lives than about the composition of the Obama team.
Consider President Obama's Chicago home.
In 2005, when then-Sen. Obama and his wife Michelle bought their 6,500-square-foot Georgian-revival style home for $1.65 million, they got a discount on their mortgage from Northern Trust because the bank saw it as a chance to build a relationship with a successful couple, according to federal regulators who investigated the deal.
“During discussions about the mortgage, Northern Trust discussed the possibility of providing investment services to then-Senator and Ms. Obama,” according to a report released Thursday by the Federal Election Commission. “In light of the investment business Northern Trust anticipated receiving from then-Senator and Ms. Obama, Northern Trust approved a discount from the rate on Northern Trust’s internal rate sheet.”
The report dismissed a complaint by the conservative watchdog group Judicial Watch which alleged the mortgage should have been considered an illegal corporate contribution to Obama’s Senate campaign.
The bank provides such discounts “in the ordinary course of business” as a way to lure “successful individuals, families, foundations, etc.” into “long-term financial relationships,” the FEC report states. In fact, when the Obamas inked the mortgage, they also opened an account with Northern Trust’s brokerage affiliate, according to the report.
Obama’s Secretary of State Hilary Clinton and her husband then-President Bill Clinton also drew criticism from ethics watchdogs and Republicans in 1999 when they moved to secure a mortgage for a century-old five-bedroom Dutch Colonial Revival house in suburban New York with a $1.35 million loan from longtime ally and fundraiser Terry McAuliffe.
“Everybody was afraid to guarantee a home loan because they were afraid the Washington press would attack them and the Republicans would attack them,” Bill Clinton recalled later, according to McAuliffe’s 2007 book, “What a Party!: My Life Among Democrats : Presidents, Candidates, Donors, Activists, Alligators, and Other Wild Animals.”
It quotes Clinton, whose legal bills left the family deep in debt as it was leaving the White House in 2001, saying: “I didn’t ask anybody to give me any money. I just wanted somebody to back up my mortgage.”
Months later, the Clintons secured a new mortgage without McAuliffe’s help from PNC Mortgage.
The bank granted the Clintons several fee deductions and waivers to its policies in writing the 7.5-percent 30-year interest-only loan, according to the FEC. But the agency concluded those exceptions would have been given to other borrowers seeking similar loans and were justified by Bill Clintons’ anticipated post-White House earning power.
“From the bank's perspective, there was a good business opportunity,” the FEC report stated.
Another top Obama diplomat, Richard Holbrooke, was the beneficiary of a business opportunity of a different sot. In his case, his 2003 home loan financed by Countrywide Financial came as part of the company’s “V.I.P.” program that gave sweet deals to friends of company CEO Angelo Mozilo and to powerful public figures in positions to help the company.
The company waived at least $15,000 in point-related fees when Holbrooke – who had been Clinton’s ambassador to the United Nations – borrowed $1.2 million to refinance his vacation home in the tony ski resort town of Telluride, Colo., according to an expose on Portfolio.com.
“Per Angelo, this loan is to be at zero points,” a Countrywide manager wrote in an email obtained by the magazine, which also reported that Countrywide gave discounts to Holbrooke’s son and daughter-in-law when they took out 2003 loans to refinance and expand their Brooklyn co-op.
The Countrywide connection led to the resignation of James Johnson, who had been tapped during the campaign to vet potential Obama running mates, after the Wall Street Journal reported last June that he received Countrywide loans at below-market rates.
The academics tapped for high-ranking administration posts likewise had unique deals, a reflection of the generous mortgage subsidies and other housing arrangements that are common at the highest-levels in academia.
Larry Summers, who as director of the National Economic Council is one of Obama’s top economic advisers, lived rent-free as Harvard’s president from 2001 to 2006 in the university’s 12-room president’s mansion.
Though the school paid him more than $610,000 in his final year, it also provided him tens of thousands of dollars to help pay for his Washington, D.C. apartment. And, when he resigned under pressure, Harvard’s severance package included a $1 million home loan which won’t require any payments until 2010.
Summers has helped lead the charge for Obama’s $75 billion housing relief plan, which would subsidize mortgage payment reductions for millions of struggling homeowners and give bankruptcy judges the ability to reduce mortgage debt.
At least three other academics named to top Obama positions – Cecilia Rouse, nominated for a spot on Council of Economic Advisers; Elena Kagan, Obama’s solicitor general-designate; and Energy Secretary Steven Chu – have reduced or subsidized mortgages through their schools (Princeton, Harvard and the University of California at Berkeley, respectively).
That’s according to the personal financial disclosure statements the three filed with their respective agencies.
Administration officials aren’t required to report home loans on their statements and most did not. But a few appointees listed fairly standard mortgage arrangements, including economic advisor Austan Goolsbee, who indicated that in 2005 he took out a 25-year adjustable rate mortgage at 5 percent worth between $250,001 and $500,000. Agriculture Secretary Tom Vilsack, meanwhile, last year took out a 13-year, 6.85-percent mortgage on his family farm worth between $250,001 and $500,000.
On the other hand, Kagan, who pulled in $437,000 last year as dean of Harvard Law School, indicated that through the university she receives “an applicable federal rate second mortgage on my home and a cash subsidy for the interest payments on that loan.”
Rouse, who earned $300,000 last year as a Princeton economics professor, reported that her mortgage is through the school and that it “owns 21.43 % of my personal residence through a joint tenancy program”
Kagan, Rouse and Chu, who earned $412,000 last year as a Berkeley physics professor, will be eligible to continue receiving their mortgage deals as long as they remain on leaves of absence from their schools. Both Kagan and Rouse indicated they will avail themselves of that option.
Kansas Gov. Kathleen Sebelius, Obama’s nominee to be Secretary of Health and Humn Services, is another top official to have enjoyed an employer-sponsored housing arrangement--she lives rent- and mortgage-free in Cedar Crest, the 6,000 square-foot governor's mansion overlooking the Kansas River.
Sebelius and her husband Gary sold the Victorian home they’d occupied for more than 20 years after moving into Cedar Crest. And, other than a Michigan vacation home given to her and her siblings by their parents, she doesn’t own any property.