Michelle Malkin » A Democrat congresswoman bails on her half-million-dollar-plus, second-home mortgage; Update: Dem denies report; “I fully intend to fulfill all financial obligations of this property;” Update: She’s a Hillary superdelegate

A Democrat congresswoman bails on her half-million-dollar-plus, second-home mortgage; Update: Dem denies report; “I fully intend to fulfill all financial obligations of this property;” Update: She’s a Hillary superdelegate

By Michelle Malkin • May 21, 2008 04:07 PM

Scroll down for updates…

Well, hell, why not?

As I noted earlier this month, Jose Canseco did it.

And as I told you back in January , more and more Californians were doing it.

So now comes word, through Capitol Weekly via L.A. Land, that California Democrat congresswoman Laura Richardson “walked away from the mortgage on her $535,000 Sacramento home, letting the house slip into foreclosure and disrepair less than two years after she bought it with no money down.”

The story of the foreclosure of Long Beach Democrat Laura Richardson’s Sacramento home is a tale of a real estate market gone sour. It is also an illustration of how far many candidates will go to seek elected office, even if it means quite literally mortgaging their own financial future.

While being elevated to Congress in a 2007 special election, Richardson apparently stopped making payments on her new Sacramento home, and eventually walked away from it, leaving nearly $600,000 in unpaid loans and fees.

Richardson’s decision to let the house slip into foreclosure was set in motion by an unlikely chain of events, only some of which had to do with Sacramento’s crumbling real estate market. Richardson was elected to the Assembly in November 2006, and purchased her new capital home two months later. But in April 2007, Rep. Juanita Millender-McDonald succumbed to cancer, creating a Congressional vacancy in Richardson’s district.

Richardson declared her candidacy for the seat, and soon found herself locked in a hotly contested, and very expensive race for Congress against state Sen. Jenny Oropeza, D-Long Beach.

While her campaign heated up, Richardson’s house slipped into default. Richardson fell behind on her mortgage payments as she loaned her Congressional campaign $60,000 – money that has begun to be paid back to Richardson personally from her campaign account, according to records from the Center for Responsive Politics.

It’s not her primary residence. According to Capitol Weekly, “[s]he also owns a four-bedroom house in Long Beach, in her Congressional district. Real estate records show she purchased that house in 1999 for $135,000. An estimate from Zillow.com puts the current value of that house at $474,000.”

Like I said four months ago:

The stigma of default is gone. Political rhetoric absolving borrowers of their responsibilities — and encouraging them to spend, spend, spend even more — has made it possible. And so has federal legislation intended to “help.” The omnibus spending bill passed last year prevents the IRS from taxing mortgage forgiveness as income up to $1 million for a two-year period.

Finance blog Calculated Risk reported last week that increasing numbers of homeowners are walking away from their homes by choice. A Wachovia executive noted during a conference call that they are “people that have otherwise had the capacity to pay, but have basically just decided not to because they feel like they’ve lost equity, value in their properties…” Some are bailing for cheaper homes in the same neighborhoods. There’s even a term that’s become popular over the last couple of years — “Jingle Mail” — that describes when homeowners cut loose and mail in the keys to the bank. Ho, ho, ho.

The true victims in this “crisis” are those who paid for homes within their means and those who waited to enter the housing market.

Congresswoman Richardson is a welcher who embodies the ethos of Washington and the bailout culture:

Spend, borrow, screw over, repeat.

***

WLS at Patterico’s blog has some good questions:

There are a couple of interesting facts here that an enterprising reporter might run down.

First, prior to being elected to Congress, Richardson was a newly elected member of the California Assembly, having won her seat in Nov. 2006 representing Long Beach. This meant she had to spend a signficant amount of time in Sacramento tending to the business of the legislature. Most state legislators in California maintain their residences in their home districts, and rent/share apartments or homes in Sacramento which they pay for with a per diem housing allowance provided to them in their office budgets. They can spend this allowance on hotel rooms or apartments.

Did I mention that the housing allowance is tax free for members who live more than 50 miles from Sacramento?

…Considering this LAT story about State Sen. Tom McClintock using a loophole in the per diem housing allowance law to own houses in both Sacramento and the LA suburb of Thousand Oaks — and receiving $36,000 tax free in per diem in 2007 as a result — wouldn’t it be nice to know of Congresswoman Richardson was receiving tax-free per diem from the State of California to pay for the mortgage on her new home in Sacramento, which she elected not to pay in order to pump money into her campaign for Congress?

You might think a reporter from the LAT or elsewhere might think that was a story.

***

Update: Hmmmmm….

California Rep. Laura Richardson today denied a published report that her $535,000 Sacramento home had slipped into foreclosure, saying she had renegotiated her loan to keep the home.

The house “… is not in foreclosure and has NOT been seized by the bank,” Richardson, a Democrat from Long Beach, said in a statement. “I have worked with my lender to complete a loan modification and have renegotiated the terms of the agreement — with no special provisions.”

L.A. Land has her full statement, which also claims: “I fully intend to fulfill all financial obligations of this property.” In addition, Richardson denies recusing herself from voting on two mortgage crisis-related bills in the House.

Responsible homeowners and taxpayers in her district–and the rest of the country, for that matter–deserve more details. The story’s not adding up.

Update: McClatchy Watch points out that Richardson is a Democrat superdelegate pledged to Hillary Clinton.

Posted in: Subprime crisis

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#101

On May 21st, 2008 at 10:53 pm, AlohaGuy said:

Interesting - I wonder if she too was getting $36,000 tax free per diem to pay the mortgage on that house. An excellent point.
#102

On May 21st, 2008 at 11:12 pm, Republicanvet said:

On May 21st, 2008 at 4:46 pm, wise_man said:

And the bank will put the house up on the market for someone else to buy. And this idiot is out of her money. Good riddance. I just don’t see how this is supposed to be a positive, or how she is or could get an hand out from her incompetence.

In my opinion, her handout came from using the property at no cost to herself…particularly since she decided to spend money she had on her campaign rather than on her contractual obligations.

The “handout” would come if there is a bailout to include the banks that incurred such risky debt.

It seems as if she planned to “flip” the house since she already owned one in her district. Why else would she buy another OUTSIDE her district.

Her timing was off, the market goes south, and she walks away.

Eventually, if the bank is near failure or does fail, do the taxpayers then get stuck with the tab because it’s federally insured?
#103

On May 21st, 2008 at 11:27 pm, Republicanvet said:

On May 21st, 2008 at 5:17 pm, southsideironworks said:

This is typical of what happens with no money down mortgages.

The buyer has no vested interest in the property, when values go down, just walk away. Easy.

I still have a hard time understanding how she could have gotten such a huge no money down mortgage on her salary and assets.

There’s got to be more to this story.

I’m sure the drive-by media will follow up on this.

/sarc off
#104

On May 22nd, 2008 at 2:03 am, Republicanvet said:

More detail from a 10:51pm ET AwtP story here.

A couple excerpts:

The city utility department placed a lien on her property in June 2007 for $154 in unpaid bills, according to documents at the Sacramento County recorder’s office. In December, she received a default notice on the mortgage from the collection agency of Washington Mutual Inc., her lender. At that point, she owed $18,356.

and:

County records show the property was sold to a company called Red Rock Mortgage Inc. of Sacramento for $388,000 — although the county assessor’s office continues to list Richardson as the owner. No listing could be found for Red Rock.

she says it’s not in foreclosure and has not been seized but:

A real estate agent’s lock box hung Wednesday from the front door of the 1926-vintage house.

Typical surrendercrat…probably has Michael Moore and Al Franken’s accountant as well:

Records at a Sacramento County tax office also show Richardson is delinquent in paying $8,950 in property taxes.
#105

On May 22nd, 2008 at 3:47 am, Bogtrotter said:

From the neighbors description of the run down, neglected condition of the place it almost sounds like she turned it into Section 8 housing while she owned it. LOL!
#106

On May 22nd, 2008 at 4:59 am, love2rumba said:

The problem is that these bad loans and perhaps more importantly the securities instruments they are atttaced to are proliferating faster than Congress and sometimes the Federal REserve and Bond rating companies can keep up with…

Hence the current credit crunch/

Thus some fianacial firms and investors got stuck with securities whose underlying loans had dubious credit which is why the Federal reserve has dropped the discount rate for banks to borrow funds from the Fed from about 6% to about 2% in less than 2 months, and additionally the Fed is setting up auctions to let financial firms bid for T-bills, and “pay” for them to the Fed by giving the bad assets/loans to the Fed as “payment”.
#107

On May 22nd, 2008 at 6:13 am, graysonret said:

I was always taught by my parents to be responsible and pay your bills. A person who “borrows” money and doesn’t pay it back, has no class or character. Because of that teaching, I may be old-fashioned to a lot of people, who feel it’s okay to borrow, promise and then ignore. It’s almost like legalized stealing. It takes a really low person who feels no remorse at all, from refusing to pay back a loan. In earlier days, people like this lady went to jail until they paid their debts. Nowadays, you file a paper and all is forgiven.
#108

On May 22nd, 2008 at 7:10 am, Bicyea said:

She should have talked with Obama first. I bet he could have set her up with Tony Rezko for a sweetheart deal on that house.
#109

On May 22nd, 2008 at 8:03 am, lgm said:

Yashmak said (#73):

Except Merton’s model is not to evaluate risk in a corporate debt. You totally misrepresent what Merton’s model is used for.

It is also known as the Asset Value Model. It is primarily used by brokers and analysts to evaluate a company’s ability to service its debts,

First you say it isn’t for corporate debt, then you say it is, then (naturally) you call me an idiot.
#110

On May 22nd, 2008 at 8:51 am, mngirl said:

FOX reported on this, this morning and they said the house was sold at auction earlier this week.

“Auction” would likely indicate “bank auction” after foreclosure or “turning it back” to the bank.

Funny how she is denying it all. Pelosi’s got plenty of millions, she can probably bail her out to make it all go away.
#111

On May 22nd, 2008 at 9:53 am, misterbee241 said:

On May 21st, 2008 at 4:18 pm, Nugai said:

I’d like to receive monetary compensation for my bad choices, too. Where exactly do I sign up?

Do like I did - write your congresscritters. Last year when a story about how good the “detainees” at Gitmo were being treated I wrote to my congress woman and two worthless sentators asking how could I get into Gitmo, because they had it better than I did, being retired and all.
I got a survey back from my congress woman, a form letter from one senator and nothing from the other one.
You might have better luck than I did.
#112

On May 22nd, 2008 at 9:54 am, JBro said:

Military members would lose their security clearance due to financial instability (more specifically, the security risk associated with a lack of financial responsibility) if their home slipped into foreclosure. Does anyone know if the the same rule applies to members of Congress? Without a security clearance, could she continue to represent her district?
#113

On May 22nd, 2008 at 10:10 am, corkie said:

lgm, you need to put your thinking cap on.

Just because the model is related to debt doesn’t mean that it determines when a company should deliberately default.

The other commenters provided perfectly accurate information. YOU did not.
#114

On May 22nd, 2008 at 11:14 am, lgm said:

corkie,

Just because the model is related to debt doesn’t mean that it determines when a company should deliberately default.

The Merton model assumes that a company defaults when it’s total worth to the owners becomes negative. It doesn’t tell anyone to do this. People throughout the finance industry use this model to put a price on the risk that a company will default on bond payments. The Merton model also is a component of models that estimate loss distributions for CMOs (mortgage debt) and assume a similar behavior from individual mortgage holders.
#115

On May 22nd, 2008 at 12:42 pm, corkie said:

On May 22nd, 2008 at 11:14 am, lgm said:

The Merton model assumes that a company defaults when it’s total worth to the owners becomes negative. It doesn’t tell anyone to do this.

Nice try, lgm. You clearly implied that the Merton model was a “strategy.”

But, if you are now willing to admit that it’s not a strategy, then why were you deliberately misleading with your first post?

Your logic was; i) the Merton model does X for corporations, ii) if ordinary people use the model, then they would default, iii) we are holding ordinary people to a higher standard than corporations.

So, I assume that you are willing to retract your statement that ordinary people “would default” if they were to use this model.

Disgustingly misleading, lgm.
#116

On May 23rd, 2008 at 12:30 pm, Yashmak said:

First you say it isn’t for corporate debt, then you say it is, then (naturally) you call me an idiot

- lgm

A try at deflection lgm? That’s so. . .YOU, you know?

I said it’s a tool for ANALYZING debt of other companies, which it is, whereas you claimed it’s used by companies to decide when to default on a debt, which it isn’t.

And in another complete misrepresentation, you say I called you an idiot, which I didn’t. It’s entirely possible I was thinking it, but I didn’t type it.