If you need any more evidence that one Merrick Alpert is in the business of pushing right wing memes against Chris Dodd, look no further than this morning’s Day, where he is quoted on Dodd’s mortgage refinance:
And among the Democrats, the senator’s upstart primary challenger, Merrick Alpert of Mystic, slammed the “sweetheart deal,” calling it “disgraceful,” and “conduct unbecoming a senator.”
Of course, Alpert knows that there is no basis to that charge. As the article in the Day demonstrates, the overwhelming consensus of those who know anything about mortgage rates at that time, as well as statistics from the federal government, demonstrate rather conclusively that the rate Dodd paid on his mortgage was widely available to people just like us. Nor, as Dodd’s website, linking to this incontrovertible source makes clear, was the fact that Dodd paid no points unusual. Fully 65% of those whose loans were originated in those months were no-point loans. Remember, that includes all borrowers, not just people with Dodd’s excellent credit rating. Nor, despite the statements of one banker, was the waiver of junk fees all that unusual. This is from a June 2003 article in the Real Estate Mailbag at the Washington Post. (You have to pay for the full article. This is from the preview, which you can read here)
A mortgage “junk” or “garbage” fee is a loan charge that goes directly into the pocket of the mortgage lender or the mortgage broker. Examples include an escrow waiver fee, loan application fee, documentation fee, underwriting fee, administration fee, warehousing fee, production fee and preparation fee. When lenders run out of names, they use “miscellaneous fee.” If such fees were not disclosed on your good-faith estimate, which the lender gave you within three days of your application, you can usually negotiate these fees or eliminate them.
If the fees were waived in Dodd’s case, Dodd was engaged in “conduct unbecoming a Senator” if and only if he 1) was getting a benefit that no one else could get, and 2) he knew he was getting a benefit that no one else could get. There’s no proof of either. Sorry, but whether he was told he was getting VIP treatment or not doesn’t prove a thing. If someone told me that and I was getting market rates I’d assume that I was a VIP in the same sense that I was special because I have a Gold credit card.
The remaining charge is that Dodd got a free “float down”-a reduction in his interest rate to reflect the rate at the time of the closing as opposed to the rate at the time he applied. That is simply not true, as David Fiderer of the Huffington Post demonstrates, as he takes down Robert Feinberg, a former Countrywide loan processor who is making the charges:
More than a year ago, Feinberg, a loan processor laid off from Countrywide Financial, stole some confidential loan documents on mortgages extended to 17 Democrats, and persuaded Conde Nast Portfolio that he had evidence of a big scandal. His documents never demonstrated much of anything. The “sweetheart deals” or “VIP treatment” were mostly nickel and dime stuff, waivers of “garbage fees” that are only paid by suckers. Nothing in the paperwork suggested that anyone was paying a below-market interest rate on his loan.
So, in order to inflate the dollar benefit of the “sweetheart deals,” Feinberg made up some facts. He offered no written backup, but Portfolio, desperate to uncover a “scandal,” took his word for it. In fact, there was written documentation disproving Feinberg’s lie. But since Feinberg concealed that information, Portfolio was able to maintain plausible deniability.
“Portfolio calculated that lower rates and waived fees would save Dodd more than $75,000 over the life of the loans,” reported NPR and dozens of other media outlets. About $2,700 of those savings were traceable to written documents, and Feinberg made up the remaining $72,000.
Feinberg lied by claiming that Dodd received free “float-downs” when he refinanced the mortgage loans on his homes in Connecticut and Washington. The free float-downs purportedly reduced the interest rate on one $275,000 loan from 4.875 percent to 4.5 percent, and reduced the rate on another $506,000 loan from 4.875 percent to 4.25 percent. (For an analysis of why the calculation of a $75,000 savings was fraudulent, go here.)
But there never was any float-down. The truth is far more banal and obvious. When Dodd applied to refinance his mortgages in April 2003, the market rate was 4.875 percent. At the time of his application, Dodd did not lock in his rate. Instead, he assumed the risk that rates might rise above 4.875 percent or that they might decline further. When Dodd closed on his mortgages several months later, market rates had fallen, and he got the lower spot rates, which were same rates extended to any comparable borrower at the time.
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Since Dodd never had a rate lock, he never had the famous float-downs that, according to Feinberg and Portfolio, saved Dodd $72,000. A float-down is a promise that you are entitled to the lower of your locked-in rate or the spot rate at the time of closing. If you don’t have a rate lock, you don’t have a float-down. Of course, Washington media types are not especially interested in things like details.
Nor are Republicans, and neither, it appears, is Alpert. Alpert e won’t get the Democratic nomination no matter what happens. Should Dodd step aside, someone like Blumenthal will step in. But he may contribute to keeping this sort of slime in the public mind and help elect a Senator Simmons. I’m not sure where he expects to go after that, but I believe our offer to run him for Town Council is now off the table
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