QUERY : When John and Vicky Kline applied for a Wells Fargo mortgage loan (in an amount greater than $500,000), did they provide more information than what is listed in his Congressional Personal Financial Disclosure form ?
Ronald Reagan Adage (MODIFIED) : Before you “Trust but Verify”, first understand the data.
OpenSecrets.org has issued a report that is getting a little buzz … “Members of Congress have long been far wealthier than the typical American, but the fact that now a majority of members arer millionaires.”
The source of the data is Congressional Personal Financial Disclosure forms.
By law, members of Congress are only required to report their wealth and liabilities in broad ranges, therefore making it impossible to precisely determine how much each is worth. A banker would demand more precise information.
Actually, the purpose of the disclosure is to let the public know what investments their elected Members have … for example, if Congress is going to repeal the Medical Device Excise Tax, voters should know that John Boehner made a purchase in Medtronic. And after the word got out that some Members may have received “sweetheart” mortgage deals, legislation was enacted to include home mortgages.
The information is due annually on May 15th, so OpenSecrets reported the Net Worth for all Members using the most recent filings for 2012 … shockingly, despite having a salary of $174,000 some reported negative net worth.
Heck even though Stephen Fincher (R-TN) who was awarded a whopping $3.4 million in taxpayer-funded farm subsidies from 1999 to 2011, he has an average negative net worth of $472,502. Sad, but the Stephen and Lynn Fincher Farm only reported earned income of $117,998 in 2012 … you could only imagine how bad it would have been without subsidies. Congressman Fincher has been recognized as one of the Most Corrupt Members of Congress Award by CREW (Citizens for Responsibility and Ethics in Washington) for his concealing the source of a campaign loan and his failure to accurately disclose his income, assets, and liabilities on his personal financial disclosure forms. Currently, his negative Net Worth can be partially attributed to a loan for a home in Washington DC … but the home is not listed as an asset … just the liability. This happens quite often as the data requested is focused on tradable investments … not homes, automobiles, jewelry, collectibles or other items of value.
Thus the Modified Reagan Adage … Understand the data … Congress members don’t need to list property unless it produces income, meaning their home is generally not listed.
So it is when looking at the Minnesota delegation, the dollars is first grouped in large pools and mortgages can carry a lot of weight.
For example, in another report using 2010 data, John Kline was listed as having an average net worth of $471,006 … but the OpenSecrets report states that his average net worth is $390,002.
So did John and Vicky Kline’s Net Worth drop almost 20% when the stock market and home values have increased ?
Nah …. The data just requests what loans are active and new loans can have a big impact.
So when the Klines went to Wells Fargo requesting a loan in excess of a half-million dollars for their new Burnsville home, they should have listed their Lakeville home and Washington DC home (as well as any vehicles, art, jewelry, etc.) as assets as well as their investments (the Sheldon Family Farm, cash, annuities, and mutual funds) for the bank to consider in granting the loan request.
From the political perspective, the question is as Congress considers broad tax reform, turns the focus to the mortgage deduction.
What if they followed President’s Advisory Panel on Federal Tax Reform recommendation “lowering the mortgage-interest cap, which is the amount of a loan on which homeowners would receive a tax break for interest paid, from $1 million to the average regional housing price in the range of $227,000 to $412,000.”
Oh, incase you were wonder that President was George W. Bush … and it got nowhere in Congress … why because it’s the Congressional millionaires that get mortgages in amounts greater than $500,000.
Congressman Kline laments about the national debt and the plight of the middle class, yet there is a bill that could help the middle class and reduce the national debt. H.R. 1213 : the Common Sense Housing Investment Act of 2013 would make changes to the mortgage interest deduction generating $196 billion over ten years.
The Common Sense Housing Investment Act of 2013 converts the mortgage interest deduction to a 15 percent tax credit. This change would enable 16 million more people who currently hold a mortgage to receive a tax benefit. The bill would also limit the credit to $500,000 mortgages, down from the current deduction’s cap of $1,000,000. These reforms would be phased in over five years.
The current mortgage interest deduction feeds the income inequality gap, as 77 percent of all benefits went to households with income over $100,000 in 2012.
The prime author of H.R. 1213 : the Common Sense Housing Investment Act of 2013 is Keith Ellison … unfortunately, this debt-reducing legislation has been denied a hearing by the House Republicans … just like they ignored President Bush’s suggestion.
Addressing Income Inequality must be a top question during the 2014 elections.