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.
Utah’s congressional delegation — what they’re worth
Sen. Mike Lee*
Net Worth ranges:
2011 » -$5,349,000 to -$845,000
2010 » -$118,000 to $150,000
2009 » $33,000 to $194,000
* includes two mortgages for a home he no longer owns
Rep. Jim Matheson
2011 » -$192,000 to $1,070,000
2010 » $543,000 to $1.37 million
2009 » $479,000 to $1.24 million
Rep. Rob Bishop
2011 » -$234,000 to -$35,000
2010 » $16,000 to $65,000
2009 » $1,000 to $16,000
Rep. Jason Chaffetz**
2011 » $41,000 to $988,000
2010 » $39,000 to $987,000
2009: $39,000 to $1.03 million
** Chaffetz has always disclosed his home and mortgage
Sen. Orrin Hatch
2011 » $1,722,000 to $3,736,000
2010 » $1.36 million to $3.09 million
2009 » $1.29 million to $3.17 million
(Hatch does not have a mortgage)
Source: New personal financial disclosures filed with the Secretary of the U.S. Senate and the House Clerk
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.Next Page >
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