Kerry loan twice as nice

[rodbarnett]

U.S. Sen. John F. Kerry used an appraisal pegging the value of his Beacon Hill townhouse at twice the amount listed on City Hall records in order to get the $6.4 million loan he needed to resuscitate his presidential bid.

The Kerry campaign says the elegant Louisburg Square townhouse that Kerry shares with is millionaire wife, Teresa Heinz Kerry is worth $12.8 million - exactly double the Christmas Eve mortgage the senator got from Mellon Bank.

But Boston's Assessing Department puts the value of the swank, five-story mansion - with six fireplaces, five bedrooms, a private elevator and roofdeck - at $6.6 million as of Jan. 1, 2003. The assessed value actually dropped from 2002's figure of $6.95 million.

The home's true value is significant since federal election laws allow Kerry to finance his presidential bid by borrowing only against his own assets - prohibiting him from tapping into his wife's millions.

``It could be a very, very big excessive contribution by his wife if, in fact, he's using more than half the real value of the house,'' said Don Simon, a Washington-based campaign finance lawyer who is unaffiliated with any presidential campaign. Kerry Heinz is limited to donating $2,000 to her husband's campaign.

The conflicting valuations also raise questions about the propriety of the loan - taken from Mellon Bank of New England, a subsidiary of Pittsburgh-based Mellon Bank, N.A.Kerry Heinz, heiress to the Heinz ketchup fortune, has a long history with Mellon Bank. The bank also serves as a trustee for The T & J Louisburg Square Nominee Trust, the entity that owns the townhouse.

http://news.bostonherald.com/national/national.bg?articleid=1106

[BruinAlum]

1. That's not unusual. My house appraised at almost double the assessed value

[Frodo]

6. That varies a lot by county.

Some counties choose to assess at a fraction of "real" value. I remember as a lender that we just assumed assesments were 70-80% of "true" value. But other counties try hard to get it as close as possible.

The county in question appears to require a full-value assessment.

[Frodo]

2. This would seem to be a very little issue.

How could they prove it? So the bank made a mistake and took the client's word for what the house was worth (I'm not saying they didn't do an appraisal, just that - at that price level - there's a lot of variability). So what?

Everybody knows the bank ISN'T looking to the house as a source of repayment for this debt.

[trotsky]

12. Sure, it's a little issue.

But since little issues are all that the Bush campaign has, they will hammer it like all the others in an effort to distract from the pResident's horrible record of job losses, massive deficits, and unnecessary war.

[molly]

3. What's your point?

[maddezmom]

4. there isn't one

:eyes:

[Frodo]

8. The point is... If the house is "really" worth $7Million..

Then he could not LEGALLY borrow more than $3.5 Million against it. He would be in viloation of campaign finance laws. And since he couldn't possibly have become the nominee without those funds for Iowa & New Hampshire, tehy could say he wouldn't BE the nominee without breaking the law.

Luckily, appraisals are a matter of opinion (the banks) and it's unlikely to be anything more than an embarrasment.

[rodbarnett]

9. If Kerry borrwed against Wifey's half...it is an excessive contribution

from the article:

The home's true value is significant since federal election laws allow Kerry to finance his presidential bid by borrowing only against his own assets - prohibiting him from tapping into his wife's millions.

``It could be a very, very big excessive contribution by his wife if, in fact, he's using more than half the real value of the house,'' said Don Simon, a Washington-based campaign finance lawyer who is unaffiliated with any presidential campaign. Kerry Heinz is limited to donating $2,000 to her husband's campaign.

[Frodo]

11. I wonder what the consequences would be?

If he took an illegal/excessive contribution... couldn't he just "give it back"? He needs to repay the loan in the next few months anyway.

[BR_Parkway]

5. your point? My property is worth well more than tax value

for the simple reason that my area only "reevaluates" property for tax purposes once every 8 years by state law. Not to mention that there is no distinction in their appraisal between the cheapest carpet and the most expensive imported marble for the floors.

[Frodo]

10. His was just done a year ago (and was actually lowered)..

and that county DOES account for interior finish condition.

It isn't you're property that is in question.

[BR_Parkway]

27. that would be your property

but that's beside the point. Is this whole issue somehow different than what every other politician is doing? Arnold with his illegal $4million, the ReThugs redistributing money in Texas. An expectation that any of these guys is going to play by the rules seems a little naive.

My response was simply asking why to someone posting an article without further commentary. Were they being supportive? Or trying to tear down? There could be reasons not in the article that weren't disclosed. I mean, push comes to shove, Teresa can start her own 529 and POUR cash into it.

[Monte Carlo]

7. The Murdoch-owned Herald is always looking to slime Kerry...

... through innuendo. I submit that the bank would not have given Kerry the loan without knowing how and why the house appraised the way it did.

[rodbarnett]

14. Kerry could have borrowed less just to reduce questions ...but he didn't

This to me raise questions about his judgement and risk taking capacity. A bit of a loose cannon. This makes Dean's "Scream" tame by comparison.

Bring on Edwards.....Kerry comes with too much baggage!

[Frodo]

15. Well, he really couldn't

Remember that he was essentially "out of it" at that point.

Without the infusion of cash he couldn't compete in Iowa and New Hampshire and would not now be the presumed nominee. Three million less might not have been enough.

[Monte Carlo]

16. That's silly.

Is a man as rich as Kerry REALLY taking that much of a risk by offering a singular (though expensive) house up as collateral on a loan? He'll survive.

And besides, the bet seems to have paid off big-time for him.

[mobuto]

18. I also doubt that the Mellon Bank

is too worried about his ability to repay the mortgage. If they thought for one minute that they'd have to seize the colateral, they might have insisted upon a more aggressive valuation. This is a non-issue created out of thin air by a right-wing broadsheet.

[Monte Carlo]

23. They wouldn't have given him the loan, otherwise.

Like you said, banks, especially the big ones, don't just hand out million-dollar loans out without giving the borrower and the terms a thorough, thorough inspection. This is a complete non-issue.

[LizW]

13. Nobody's going to care

The details of the loan aren't the problem. The FACT of the loan is the problem. A rich candidate can buy his way into the front runner position conceivably without any donors having to get involved. The big money donors can wait until his victory is assured and THEN plop their money into his campaign. The money guys love this, because they don't have to hedge their bets by giving to everyone. They can wait for a winner and then load him up.

Even worse is the path of the money. Once the nomination is secured by the rich guy, the big money donors can give to the "campaign", when in reality what they're doing is paying off the guy's mortgage. It's all legal, but it stinks to high heaven.

The fact that the guy wouldn't have the multi-million dollar house at all if he wasn't married to the heiress just enhances the stench.

[mgc1961]

20. I agree.

I've been told the loan was a smart move. Hey, it might be legal and it's even a smart move to, in essence, buy the nomination if the ultimate goal is to enhance selfish designs. That's really not much different than the President's attempt to buy the nomination through shamless pandering to corporate interests. The only difference, as I see it, is the Presidents actions are only slightly less honorable in that he spends other peoples money rather than gamble with his own.

So, win at any cost is the name of the game? I'll do whatever it takes to secure the position? I think it stinks to high heaven even if in the end it's considered "legal." It reminds me of the "aggressive accounting" tactics employed by so many companies who later restated their earnings in response to the Enron debacle.

[Larkspur]

29. Sheeple don't care but this tactic just adds to the cynisism that politics

is for the wealthy only and makes it harder to reform the political process voluntarily.

The only way I see political change happening is if another Great Depression happens. It was the Great Depression that ripped the aura of prestige and confidence associated with the wealthy and Big Business. Of course if Bush gets re-elected or Kerry continues the shell game Bush plays, we will end up in another Great Depression.

[GodHelpUsAll2]

33. That's not exactly correct

New FEC laws may become a problem for Mr Kerry and this loan. It use to be that you could take a mortgage like Kerry did (he did the very same thing when his senate race was close with the very same house) then after the race was won the donations from the big money donors could be used to pay off the debt. However, the new FEC laws don't allow for that. He can use contributions to pay off the debt, however this time it has to be paid off before convention in order to use contributions. Once the nomination is locked he can no longer use donated money to repay the loan and his rich wife can not pay it off for him. There have been several articles written about this very issue. The question at hand is, can he raise enough money to repay the debt before convention and still have the money to campaign and fight off the attacks of the Bush mean machine? If not, his 158,000.00 senate salary is not enough to pay off the 200,000.00 interest only payment. The first 10 years of this loan are interest only payments. After that they go way up and start to account for principal too. It's a sticky situation at best.

[Larkspur]

35. Here's my guess on Kerry's solution...

The DNC will hold a special fundraiser on the eve of the Convention to pay off Kerry's loan. They'll mask it as a fundraiser for all the Dem Prez candidates, but it will really be for Kerry.

This is why I hope Dean supporters will help Dean pay off his $400,000 debt. I don't what DFA to participate in the special DNC fundraiser to pay off their debt. It would be a form of revenge if we can pay off DFA's debt and Kerry can't.

[LizW]

37. I stand corrected

The FEC law you mention at least tries to rememdy the situation. There is a little bit of a gamble involved in the mortgage. I still don't like it, though.

[Dookus]

34. So you say money can by the nomination?

Then why did Dean do so poorly?

[emulatorloo]

17. A lot of snarky language/phrases w negative connotations in this piece

"swank"
"millionaire wife" etc etc etc

seems like these reporters have an ax to grind

[rodbarnett]

19. He either borrowed into his wifes half .... or paid only half taxes

neither is going to play well in the press. I think this shows bad judgement and is very telling about how far Kerry is willing to go to win.

I still think Edwards is our man.

[Frodo]

21. That's a little excessive. He didn't "pay half taxes"

It isn't like there is an obligation to go to the county and say "you've undervalued my property - please double my bill".

The only hint of a problem there is if there is some evidence the assessors office kept the number low because of who he is. And the chances of that (or of proving it) are incredibly low.

[BR_Parkway]

28. Since it's owned by a Trust

community property laws don't apply. Do you have anything to support that she owns half the trust?

[Frodo]

30. I don't think that's the case.

If it were owned by a trust (a seperate legal entity) he would have a tough time getting a mortgage on it. It has to be HIS assets securing the loan for the contribution to be legal.

If she ISN'T half owner of the trust there could be additional problems.

[Scott Lee]

39. It helps to marry the rich, thats the Kerry axiom.

[displacedtexan]

22. You obviously don't own property.

Assessed Taxable Value is usually 35-50% of the appraised value of a primary residence.

Also, prime real estate usually sells for much more than the appraised value today. That's why private seller auctions in hot locations are so popular.

For example, a burned out, gutted brownstone in Baltimore (down the street from Rep. Elijah Cummings) just sold at auction for $185,000. It will take at least $200K to restore it. Its taxable value: $595.00 annually.

[rodbarnett]

24. If you are truly from Texas you know that appraisals there are very close

to market value. Texas does not have the same bubble inflated property values that most other states have right now. I've owned property since 1982 and understand property taxes all to well.

[displacedtexan]

31. JK's house is not in Texas, and I live in Baltimore now.

My family still lives in Fort Worth, and they all own property. Property taxes in DC and Baltimore are ridiculously low. In fact, they are a complete disgrace, IMHO.

But the law is the law. Accusing JK of somehow cheating the value of his property (when you know nothing about local tax assessments) is snarky, to say the least.

If you don't like him, don't vote for him.

[GodHelpUsAll2]

36. That's a very assuming statement

The 30-50% tax assement to real value is off the mark. I have worked in mortgage since 91 and serviced mortgages all over the country and have bought and sold 4 houses in Texas. Where the taxable value is generally lower than the actual residential appraisal value it usually does not come in with a 35-50% variance. In fact there are many out there who have taxable values much higher than what they actually bought the property for just like the one you described. The recent years market has a lot to do with it. Thus the rush to file protests with the apraisal boards. The argument made in getting the assessment lowered, the property is only worth what you can sell it for. The accessment is made based on a wide variety of things and one of those things is what "comparable" houses in the area have sold for. So, if you have a home that sold last year for 130,000 and surrounding houses were selling for comparable amounts the taxable value will reflect somewhere in that range within 10-20K usually. However, if you manage to land a deal and buy one of those 130,000 houses for say 95,000 you can protest the taxable amount and win easily. The bad thing about those kinds of deals, where they are great for the one purchasing, they lower the market value of all the homes around it also lowering the taxable value. Generally tax acessments are done on a yearly basis and adjust accordingly to the current market which is why people see adjustments made to escrow and the increases to mortgage payments. It is true that taxable value does not account for the difference between cheap carpet and Italian marble. This is why you will very often hear a real estate person or a lender tell you "Don't build a 100,000 house in a 50,000 dollar neighborhood. Because if you do then you are basically stuck hoping you can find someone who is willing to pay 100,000 for a house that will never be truely "comparable" with the location.

[Larkspur]

25. I'll save this article. It justifies my reason for not donating to Kerry

and his GE campaign.

I'll send this back in the envelope I got from Bill Clinton asking me to donate to the GE campaign. Kerry can go take out more loans. He'll never get a penny from me.

[AP]

26. A Boston paper said it was worth 20 million. And who doesn't know that

assessed valuations for tax purpose are always much lower than market value?

Incidenally, it's interesting that a millionaire's home is assessed at, perhaps, 14 mil less than it's worth. I bet the people in south boston don't get tax breaks like that!

[libview]

32. you got that right.

the rules don't apply when your John F Kerry.

[Scott Lee]

38. No way, not Honest John!