KOA's Newman repeated baseless suggestion that Obama received preferential treatment in mortgage interest rate

Summary: Newsradio 850 KOA's "Gunny" Bob Newman asserted that Sen. Barack Obama received a "VIP rate" for his home mortgage "that no one else apparently could get." He presumably referred to a July 2 Washington Post article, which suggested without substantiation that Obama received preferential treatment in the interest rate for his 2005 mortgage. But the article cited no evidence that the interest rate was preferential and in fact quoted a bank executive as stating that the rates offered to Obama were "consistent with internal Northern Trust rates at that time."

Commenting on Sen. Barack Obama's July 2 campaign appearance in Colorado Springs, Newsradio 850 KOA host "Gunny" Bob Newman claimed on July 2 that Obama received a "VIP rate" on a mortgage for his home "that no one else apparently could get." Although he cited no source for his claim, Newman presumably referred to a July 2 Washington Post article that, as Media Matters for America noted, baselessly suggested 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. However, as Media Matters for America pointed out, in the 21st paragraph of the article, the Post reported that according to Northern Trust Vice President John O'Connell, "the rates offered to Obama were 'consistent with internal Northern Trust rates at that time.' " The Post also quoted O'Connell as stating, "The bottom line is, this was a business proposition for us," and concluding, "Our business model is to service and pursue successful individuals, families and institutions."

As Media Matters for America noted, the Post 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.' " The Post quoted LaBolt from his statement, "The Obamas have since had as much as $3 million invested through Northern Trust."

The Post reported that the Obamas received an interest rate of "5.625 percent on the 30-year fixed-rate mortgage." The article 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 the Post 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, the Post 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. The Post 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 the Post 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." The Post article stated that the Obamas had received a "super super jumbo" loan.

As Colorado Media Matters has noted, Newman has a history of hyping baseless Obama "scandals." On his July 2 broadcast, Newman repeated the baseless claim that Obama had engaged in "making bogus land deals" with Tony Rezko, a Chicago figure who in June 2008 was convicted of fraud and corruption charges unrelated to Obama.

From the July 2 broadcast of The Jon Caldara Show, with guest host "Gunny" Bob Newman:

NEWMAN: Yeah, Barack Obama down there in the Springs today, telling people how important it is -- "Oh, you gotta, you must join the military, you gotta join the U.S. Foreign Service, or AmeriCorps, or the Peace Corps." Hey Barack, how many of those did you join? Zero?! [laughs]. You were too busy making bogus land deals with your felon pal Tony Rezko. You were too busy getting a "super super jumbo" loan, a VIP rate, that no one else apparently could get from that bank that you were doing business with. And at the same time, you're slammin' the bogus mortgage industry, and yet there are you are, very quietly taking out a "super super jumbo" loan at a special VIP interest rate. Caught you again.

—E.B.

John McMahon is an intern at Colorado Media Matters.