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.