We are told that the subprime mortgage crisis and resulting increase in foreclosures are the result of dishonest mortgage brokers and predatory banks. The stories you never hear about however are those similar to California Congresswoman Laura Richardson who is now walking away from the mortgage on her $535,000 home in Sacramento.

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.

Patterico asks the question noone from the LA Times wanted to:

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?

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.

If it turns out that Congresswoman Richardson was indeed receiving tax-free per diem from the State of California, I am sure the IRS would be interested in finding out, not to mention the taxpayers of California.

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Dumb Dems, Election 2008, Taxes