CA Lawmaker Sees Real Estate Bubble Pop

August 09, 2012 / Russell Legato, Residential Property Analyst

California state lawmakers are in the habit of renting or buying a modest apartment or home to stay in while they are working in the Capitol. The tax-free expense allowance each one receives is $28,000 per annum. One legislator reasoned that buying property would increase in value and purchased a home in Sacramento. But the real estate bubble popped and so did his plan.

CA Lawmaker Sees Real Estate Bubble Pop

He had not purchased a modest property. Instead he paid $463,000 for a property with three bedrooms and amenities. Currently, he is among a group of ten or more legislative homeowners in this position. To further complicate his situation, his pay was cut as was that of all legislators.

Instead of the profit he would have made selling the property before the real estate industry tanked, he was left owning a home that would only sell at a loss.

A short sale is nearly as bad as a foreclosure. But, if the mortgage cannot be managed, these two options may be all that is available. In the case of Mendoza, a campaign donor came to his rescue.

Still, he owes $150,000 more than his home in Sacramento is worth. His accountant, Cecy Groom, found a way to help him by securing investments of $42,000. Using the money, he will be able to keep the property.

His rescue did not come without repercussion. When he filed the records that are needed when donations are received, the doctor who invested $30,000, Shura Moreno, turned out to be in a difficult position.

He is enmeshed in a scandal involving the medical clinic he has in East Los Angeles. Allegedly, he has defrauded the Medi-Cal program. The district attorney is investigating. He is innocent of the prescription fraud he is charged with; but only until he is proven guilty by a court of law as seems inevitable at this time.

Mendoza expressed shock at learning of these circumstances. Moreno’s only retort was to say he is not interested in becoming the owner of Mendoza’s house. Mendoza hopes to be able to keep the property by paying the mortgage out of his $123,000 yearly salary. Now his highest hope is to come out of the ownership without losing money.

Two others were not as fortunate. Former Assemblyman Mervyn Dymally and former Assemblyman Ed Chavez each lost a home to foreclosure in Sacramento. The real estate bubble has had its effect on individuals of all economic levels.

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