It's not unusual for a homebuyer to rely on help in getting a mortgage by having someone co-sign for the loan. Parents do it for their children all the time. But the president of the United States having a friend guarantee his mortgage?
That's unusual, said Keith Gumbinger, vice president of HSH Associates, a New Jersey-based firm that tracks mortgages nationwide.
"But in reality, the way that they went about getting this mortgage structured was about the easiest way to do it," Gumbinger added.
The president and the first lady signed a contract Thursday to purchase their first home since 1983, a $1.7 million five-bedroom Colonial in Westchester County, New York. The purchase paves the way for Hillary Rodham Clinton to establish residency to run for the U.S. Senate.
The financial aspects of the deal were intriguing because the Clintons, who put down $350,000 (approximately 20 percent) from their blind trust, had their chief fund-raiser, Terry McAuliffe, personally secure the $1.35 million mortgage with Bankers Trust.
"It doesn't sound like they got any magic deal," said Gumbinger. "But who's to say after Bill is out of office that he does an advertisement for BT. Anything is possible."
However, Alan R. Ingraham, vice president of MNC Mortgage Inc., said his company would not have approved the loan terms the Clintons received.
"On paper, anybody other than the sitting president would not be able to get that loan," Ingraham said.
For starters, Ingraham said, MNC Mortgage usually requires the buyer of a million-dollar property to make a down payment ranging from 35 percent to 40 percent.
He added that the burden of the Clintons' legal debt -- $5 million, according to the White House -- would also hinder their application.
And, even though most observers believe both Clintons have significant post-presidency earning power, typical borrowers couldn't use projected income to help them qualify for a mortgage.
"A normal customer, even an existing one, couldn't do it with us," Ingraham said.
The Clintons applied for a five-year adjustable-rate mortgage that ties into the London Interbank Offered Rate, a rate that international banks charge each other for large loans.
The Clintons' mortgage, which would have to be repaid or refinanced after the fifth year, adjusts every six months to an interest rate that will be set one point higher than the London interbank rate.
The Clintons won't lock into their interest rate until they close on Nov. 1, but in today's market their initial mortgage rate would be 6.52 percent.
The Clintons "made a determination that this mortgage product was the most sensible one for them," said Jim Kennedy, spokesman for the White House counsel in Washington.
"They felt it was the best mortgage to seek. Everyone wants to get the best kind of mortgage to fit their financial picture."
Gumbinger said the Clintons' mortgage made sense for Bankers Trust as well because a short-term $1.35 million loan would be more attractive to sell to investors in the secondary market than one locked in for a traditional 30-year period.
"And of course there is some cachet for BT for having them getting to say, 'Hey, we did the president's mortgage. We must be good -- they came here,' " Gumbinger added.
$10,915 a month
Based on the Clintons' interest rate and mortgage amount, their monthly payment, including taxes and insurance, would be approximately $10,915, according to Tom Champion, manager of the Lutherville branch of Norwest Mortgage.
However, Ingraham speculated that the terms of the deal would allow the Clintons to pay interest only, lowering their monthly payment.
"Under traditional methods of qualifying, we would be looking for $397,000 a year annual income and that is assuming no other debt," Champion said.
The president's pension when he leaves office will be $151,800 annually for life.
Mrs. Clinton, if she wins a Senate seat, will receive an annual income of $136,700. She reported $74,289 in 1998 royalties from her book, "It Takes a Village."
According to their 1998 tax return, the Clintons' adjusted gross income last year was $504,109.
Gumbinger believes the Clintons used McAuliffe's loan guaran- tee to avoid additional disclosures and to streamline the process.
"I am sure they have horrendously complicated finances, both by legal necessity and by the way their income comes in," Gumbinger said.
"This guaranteed or co-signed loan was probably the easiest way to not have to disturb a whole lot of complicated financial doings."
Gumbinger said the Clintons probably avoided political controversy by having a loan tied to an overseas index, "which does not have a specific relationship to whatever the Fed does."
Pub Date: 9/04/99