Alpine • Senator knew he’d have to sell when he left job as a lawyer.
Al Hartmann | Tribune file photo Sen. Mike Lee was forced to sell his Alpine, Utah, home in a short sale in which the mortgage bank lost up to $400,000. The Lee family is now residing in a rental home.
Washington • Less than two years into office,
Sen. Mike Lee was forced to sell his dream home in Alpine with his
mortgage bank taking a significant loss — up to $400,000 — in a “short
sale” as the housing bust in his neighborhood drained his house’s value.
Lee purchased the home for around $1.1 million
in January 2008, at the height of the housing boom and when he was
working as a private practice lawyer. But as home prices dipped and he
was elected to the Senate, Lee found himself underwater in the home and
without the means to pay off the difference.
The home eventually sold for around $720,000,
according to Utah County records, after J.P. Morgan Chase agreed to
write off the loss in the value and Lee forfeited his “significant” down
payment.
“It certainly is something that is painful to
go through and I know a lot of people are going through it, and I feel
for those who have had to go through it,” Lee said Thursday in response
to questions from The Salt Lake Tribune.
“It’s not fun. It’s not something any of us
would have chosen. But you do what you have to do when income doesn’t
match your outlays. You have to pare your outlays down.”
Lee’s wife and three children are now living in a rental home in Alpine, he said, and will continue to do so for some time.
The state’s newest senator ended up in a “short
sale” — in which a mortgage holder and bank agree to take a monetary
hit to sell the home — after Lee was elected to the Senate and left his
law firm, Howrey L.L.P.
Lee said he knew he had to sell his home if
elected because he went from a salary of several hundred thousand
dollars a year to the Senate payroll of $174,500. But he thought
improvements to the home and a rebound in housing prices would help.
Failing that, he was owed a large sum, he says, from Howrey that could
provide a “cushion.”
But then a neighbor’s home went through a short
sale, dropping home values on the street, and Howrey filed for
bankruptcy, leaving Lee with little option other than to persuade the
bank to take a loss.
“It pains me that those were the circumstances, but they were,” Lee said.
Lee’s home sale came up as members of Congress
were required to disclose their personal finances and for the first time
list their home mortgages; Lee’s disclosure, because of his home sale,
listed both his mortgage and a refinance loan for his home. Pressed on
the mortgages, Lee’s office noted the senator was now renting.
Taylor Oldroyd, the chief executive of the Utah
County Association of Realtors, said housing prices are stabilizing in
his area and for the first month in three years, they’ve seen averages
flattening after the previous run of declines.
Generally, Oldroyd said, his group has been
trying to work with lenders to modify current mortgages or use other
means to help out a customer rather than face a short sale or, worse,
foreclosure.
Lee isn’t alone in Congress.
The Illinois Daily Herald reported
that Rep. Joe Walsh, R-Illinois, faced a foreclosure on his condominium
in 2009 as well as financial setbacks from past-due child support and
tax liens. Walsh, too, spun his financial situation as making him more
attune to the troubles of many Americans.
Short sales are increasingly becoming the
preferred option for banks, according to Daren Blomquist, vice president
of California-based RealtyTrac, which looks at housing trends.
“Banks have recently been given additional
reasons to opt for short sales rather than foreclosure over the past 18
months,” Blomquist wrote this week on his company’s blog, noting that
scrutiny over foreclosure practices were a nightmare for the banks.
Because of a recent court settlement between
attorneys general of 49 states and several lenders over foreclosure
practices, short sales will surge in 2012, Blomquist predicted.
For Lee, who has made his mark in the Senate
hammering the theme of government living within its means, the move was
challenging but necessary.
“It wasn’t, of course, what we wanted,” he
said. “We were, of course, willing to take the sacrifice for the
opportunity to serve in the Senate. We knew that it could become
necessary.”
The loss, he says, is hard for his family,
displaced because of his election and the circumstances of the housing
bust and his former firm.
“We bought our dream home,” he said. “It was a beautiful home.”
The home is now owned by the vice president of a telecommunications company, county records show.
tburr@sltrib.com
Andreas Rivera contributed to this report.
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