Newly Elected California Congresswoman Walks Away from $535,000 mortgage shortly after being elected.
Posted by WLS:
Funny how you only find this information in an LAT Blog and not on the news pages.
Capitol Weekly reports newly elected California 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.
“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,” the publication reports.
Richardson, a Democrat from Long Beach, declined to comment for the Capitol Weekly story, and her office did not immediately respond to a request for comment from LA Land.
Capitol Weekly, citing tax records at the Sacramento County assessor’s office, reports “… in January 2007, Richardson took out a mortgage for the entire sale price of the house — $535,000. The mortgage amount was equal to the sale price of the home, meaning she was able to buy the house without a down payment, even though the housing market was beginning to turn. A March 19, 2008 notice of trustee’s sale indicates that the unpaid balance of Richardson’s loan, which is held by Washington Mutual, is more than $578,000 –$40,000 more than the original mortgage.”
In addition to 100% financing on the home itself, the report quotes the woman who sold the house to Richardson as saying she also gave Richardson $15,000 toward closing costs.
The weekly also reports Richardson’s residence quickly became an eyesore, angering neighbors. The report says she recused herself on two key house votes on government efforts to address the foreclosure crisis.
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?
So why did Richardson, two months after being elected, buy a $500,000+ house in Sacramento instead?
In April 2007, the Congresswoman from Richardson’s district, Rep. Juanita Millender-McDonald succumbed to cancer, creating a vacancy in Richardson’s district. She was elected to Congress in a special election to fill that seat in June 2007.
Why did she stop paying her mortgage on the Sacramento house? According to Capitol Weekly:
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.
Rather than continue paying on the loan as the house lost value in the declining housing market of Sacramento, she loaned personal funds to her campaign, and simply walked away from the mortgage. She still has a four bedroom house in Long Beach.
When the house was placed in foreclosure, documents show that the unpaid amount owned to the bank that gave her the loan is $587,000.
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.