Real estate bubble bursts for California lawmakers too

SACRAMENTO — State lawmakers typically keep modest quarters near the Capitol to use when they’re in town, with help from their tax-free expense allowance of $28,000 a year.

Assemblyman Tony Mendoza bought a three-bedroom home instead, paying $463,000 for it after his 2006 election.

“If you bought property, property values would go higher,” said the Democrat, whose main home is in Artesia. “So I figured as soon as I get there [Sacramento], I will buy the house.”

But now he is one of at least 10 legislators who didn’t fare well in a real estate climate that once showed no sign of cooling. The housing market tanked, the recession lingered and legislators’ pay was cut.

Unlike some predecessors who made handsome profits on second residences in Sacramento or in their districts before the downturn, these lawmakers have found themselves unable to pay their mortgages or stuck with homes that would sell at a loss, or both.

At least five have endured foreclosures or short sales. The others have hung on; to do so, at least three have depended on people who work for them — and in Mendoza’s case, on a campaign donor as well.

As Mendoza nears the end of his final Assembly term, he says he owes $150,000 more on his Sacramento home than it’s worth. A longtime campaign contributor, Cecy Groom, who is also his accountant, rounded up investments of $42,000 to help him keep the home on Soaring Hawk Lane.

In filings required by the state, Mendoza reported receiving $6,000 each from Groom’s daughter and Beatriz Ricartti, a Los Angeles businesswoman who subsequently donated to Mendoza’s political coffers. Covina physician Shura Moreno invested $30,000.

Moreno is under investigation by the Los Angeles County district attorney’s office, and five employees of his East Los Angeles medical clinic await trial on charges of defrauding the state’s Medi-Cal system, prescription fraud and other offenses.

“I was totally shocked by that,” Mendoza said.

Moreno would say only that he is not interested in taking over ownership of Mendoza’s house.

The lawmaker also rented a room in the house to fellow legislators and to Gabriella Villanueva, whom he hired in November 2010 as a legislative assistant for $60,000 a year. Villanueva paid him $500 a month in rent.

Villanueva said there was no tie between Mendoza’s giving her a job and her decision to rent from him, and she has since moved out, although she would not say when. She was hired just before a legislative pay cut was to take effect.

Mendoza has attributed his financial troubles partly to a salary cut, which cost him about $20,000. “I was paying the mortgage with that,” said Mendoza, whose annual compensation now is $123,000, including the tax-free per diem.

He said he wants to avoid losing his house and the money he has put into it: “If I break even, I will be happy.”

At least two other legislators are getting help with personal finances by renting to their aides, their financial disclosures show.

Assemblywoman Mary Hayashi (D-Hayward) and her husband bought a home in Castro Valley, in the Bay Area, for $698,0000 in 2004. When they put it on the market for $499,000 last year, it didn’t sell.

The pair’s residence today is in Hayward, also in the Bay Area. Hayashi legislative aide Christopher Parmon and his husband, Chabot College Chancellor Joel Kinnamon, occupy the Castro Valley house.

Parmon said he asked to live there. The couple began renting in February 2010, less than a month after Hayashi gave Parmon a $7,500 raise, lifting his salary 10% to $82,440.

Parmon said the raise was unrelated to his move to his boss’ property and declined to say how much it costs to live in the home. Hayashi’s financial disclosures show Kinnamon paid her between $10,000 and $100,000 in rent last year.

Hayashi, who in January pleaded no contest to shoplifting charges, did not return calls for comment.

Assemblyman Richard Gordon (D-Menlo Park) has an employee renting a San Francisco condo he bought for $680,000 four years ago. The county assessed the home’s value last year at $560,000.

The employee, field representative Joey Vaughn, pays Gordon more than $10,000 a year to live there. The lawmaker said he rents to Vaughn because he is trustworthy.

Westminster Republican Van Tran chose a different route out of his dilemma. He estimates that he and his wife lost $300,000 on their second home in a short sale when he completed his Assembly term in 2010. His bank also lost money, although Tran said he could not recall how much.

Tran said the $783,000 Sacramento house seemed a safe investment after his election in 2004. But by the time he moved back to Orange County six years later, he could not sell it for what he owed.

But “geographically, physically and financially,” he said, “it was untenable to hold onto the house.”

Assemblywoman Alyson Huber lost a million-dollar home to foreclosure in June. She said she could not afford two mortgages — one on that house, which she and her husband built in 2006, and one on another home they bought for $520,000 when they split up.

The Democrat from El Dorado Hills, in the Sacramento area, said her husband stopped paying on the first home soon after she moved into the second one because it was worth less than they owed.

“I was legally obligated to pay,” the lawmaker acknowledged. But “I could not afford to pay his mortgage.”

Tim Huber did not return calls from The Times.

Former Democratic Assemblyman Mervyn Dymally of Compton left office in late 2008 and lost his Sacramento home to foreclosure seven months later, leaving unpaid debt and costs of $177,000, according to county records.

In August 2009, the records also show, former Democratic Assemblyman Ed Chavez of La Puente had his Sacramento home foreclosed upon. His unpaid debt and costs were $302,000.

Neither official returned calls for comment.

One former state lawmaker defaulted twice. U.S. Rep. Laura Richardson, a Long Beach Democrat, walked away from her debt on a $535,000 home in Sacramento after she left the Assembly for Congress. The house was sold at auction but was returned to Richardson after she complained to her lender, Washington Mutual.

The congresswoman defaulted again and unloaded the property last year in a short sale for $320,000.

patrick.mcgreevy@latimes.com