I subscribe to a lot of publications and information sources to stay on top of what is happening in my industry; the mortgage industry and more specifically the mortgage brokerage industry. Daily I am reading columns, articles and opinion pieces on the real estate, mortgage and credit markets, on housing prices, on lenders shutting down offices and stopping wholesale lending (where we operate), on foreclosure rates and homeowners trying to negotiate settlements and short-pays.
It is from this background of knowledge and over twenty years experience that I read earlier this week of Congresswoman Laura Richardson’s property in Sacramento having been foreclosed on by the lender, Washington Mutual. That said the basic facts are Richardson purchased a property in Sacramento in January 2007 for $535,000 with no down payment and a credit of $15,000 for closing costs from the seller. According to the reports Richardson subsequently failed to make mortgage payments causing a notice of default to be filed in March 2008 and also failed to pay property taxes amounting to over $9,000. On May 7, 2008 a Sacramento real estate broker purchased the property that had been Richardson’s at an auction of foreclosed properties; Richardson’s foreclosure was over the home is no longer hers.
Two releases from Richardson’s office, one dated May 21, 2008 the date the story broke and another from yesterday, May 22, 2008; the first statement states with italic emphasis, the property is “not in foreclosure and has NOT been seized by the bank.” In the second release her office states she had several different jobs and positions from 2007 to 2008 and “all of the transitioning has affected my finances.”
Questions abounded as I read all the available information, questions as a constituent of Richardson’s district naturally, but more questions as a mortgage professional with experience and knowledge of the mortgage process from application through funding and the foreclosure process. Here they are.
In the May 22, 2008 statement Richardson speaks to the number of positions and offices she held from 2007 to 2008 and that it affected her finances. Richardson was elected to the State Assembly in November 2006. Which means shortly after being elected to a position with a salary in the neighborhood of $110,000 at the time, Richardson entered escrow on a $535,000 home, qualified for a $535,000 mortgage and closed escrow on that home and mortgage. At the same time she maintained her official residence in Long Beach, also with a mortgage.
When Richardson applied for her loan was it with her upcoming salary of $110,000? Was this what we term a “full doc” loan or was it a “stated income loan” where no verification of income is required? If the latter one wonders if Washington Mutual will investigate the stated income on the application in light of their loss of approximately $200,000 on Richardson’s mortgage.
Closing in January 2007, Richardson’s first payment due date was either February 1 or March 1, 2007. According to reports Richardson was over $18,000 behind on her payments in December 2007, which would be approximately four to six months worth of payments. Apparently she stopped making payments some time after May or June 2007. It appears that after she purchased the property, Richardson probably made only three to five payments before she quit paying on the mortgage. This coincides directly with the timing of her run for Congress, a race that was won when she beat fellow member of the Assembly Jenny Oropeza in the June 2007 Democratic primary. Did Richardson quit making payments after she won the primary or before? When Richardson took the oath of office in September 2007, how delinquent was she on her mortgage?
Richardson claims in the May 22nd statement that “In March of this year, I was notified that the mortgage was in default. At that time I began continuous and ongoing discussions with the lender to reinstate and modify the loan…” Richardson had to be notified the mortgage was in default? Who did she think was paying the mortgage if not herself? How could the payments not have been made for possibly nine months or more and she was not aware of the account’s standing? How can someone honestly not know they are tens of thousands of dollars delinquent on a mortgage?
During the Congressional campaign Richardson loaned her campaign $60,000. Was winning her seat to Congress more important than fulfilling her obligation to Washington Mutual and her promise to pay as stated on the note and deed of trust she signed? Why was she asking the voters to trust her to represent them while at the same time breaking the trust Washington Mutual put in her to repay her obligation. If she had the $60,000 to lend her campaign she definitely had the funds to pay her mortgage, why did she not make the payments on her mortgage?
At the time of the trustees sale on May 7, 2008 over $9,000 was owed in taxes on Richardson’s property. From taking ownership of the property in January 2007 until it was foreclosed on in May 2008 it appears Richardson failed to make the tax payments due in April 2007 (for which about half the payment would have been credited to her at time of sale by the seller), December 2007 and April 2008. As a member of the United States Congress in a position to determine the tax obligations that you and I pay, what justification does Richardson have for failing to paying her property taxes to the County of Sacramento?
Finally, during her campaign against Oropeza for Congress, Richardson’s campaign had a mailer critical of Oropeza missing several votes and days in attendance in the Assembly—some of the absences were because Oropeza was battling cancer. Was it a bigger transgression for Oropeza to have been absent for a period from her duties as a member of the State Assembly, or for Richardson to have missed her mortgage payments? Ultimately which costs the taxpayers and constituents more? Which was a greater violation of trust?
Clearly Richardson has benefited from the timing of this issue. The notice of default was filed as public record in March 2008, but the story was not picked up until this past week—well after the filing deadline for those who wish to challenge Richardson in the primary on June 3rd. On the primary ballot will be two challengers, seemingly perennial candidate Peter Mathews and Wrigley resident Lee Davis; had the news of Richardson’s default been public sooner would we have seen Oropeza challenge Richardson again?
Unless a strong independent candidate or a candidate backed by the GOP running as an independent can make the November ballot it appears that Richardson will win the local primary and therefore the election in November due to the gerrymandered district that is overwhelmingly Democrat. Between now and then will we see a mea culpa from our esteemed Congresswoman?
This story touches me personally. For months I have been reading and hearing about dishonest mortgage brokers who lied and cheated and forced borrowers into bad loans that are now foreclosing on poor homeowners who had no knowledge of what was happening. The negative press and sentiment to my industry as been tremendous; thankfully my client base and millions of other homeowners in the country know that there are honest and trustworthy brokers who have helped them achieve homeownership. There are too many Laura Richardson stories out there that are not reported, borrowers with the means to pay there mortgages, they just choose not to; these borrowers add to declining home values, losses for banks and lenders going out of business.
But perhaps the part of the story that angers me the most is that over-regulation that is arising from Congress as they try to “solve” the problem; much of the regulation doing more to harm good buyers from getting good mortgages than solving any problems. Richardson is part of this process, part of the legislator issuing regulations governing the mortgage and real estate industries—does she have the integrity to recuse herself from future votes pertaining to mortgage, credit, banking and real estate? What about recusing herself from matters of taxation? She did not do so when she voted for the Mortgage Forgiveness Debt Relief Act of 2007; an act from which she now benefits. The $200,000 principal loss by Washington Mutual is not a taxable event for Richardson thanks to her vote—had the act not passed she would be looking at a tax bill of $40,000-50,000 depending on her tax bracket.
Yes fellow mortgage brokers and I have been taking it on the chin as the media and public officials pile on and point the finger at us for the credit crisis and rising number of foreclosures. But those of us that are honest, deal with our clients from a position of integrity and work hard to further homeownership in our communities know we are not the bad guys and that our clients and business partners still trust us.
In the end I ask, who do you trust more your local mortgage broker or your Congressional Representative?
Your thoughts welcome, click here to email me or on “Leave A Comment” below for public response.
