By Joseph Tsidulko
By Patrick Range McDonald
By David Futch
By Hillel Aron
By Dennis Romero
By Jill Stewart
By Dennis Romero
By Dennis Romero
WHEN BACA BEGAN LOOKING FOR FINANCING TO BUY A NEW HOME, BRYANT CONSULTED with a local law firm, Reed and Davidson, and advised the sheriff on the ethical considerations in play. "It was simple. I told him that he couldn't get a loan that Joe Blow on the street couldn't go in and get," Bryant says.
More complicated is whether Baca followed this advice.
What's clear is that Richland played a key role in the deal, shepherding Baca from initial negotiations to close of escrow in a matter of weeks. On April 2, Baca recorded a Deed of Trust securing a $600,000 loan, brokered by the Richland Group and financed by Merrill Lynch Credit Corp. The same day, he filed a second Deed of Trust, securing a $150,000 down-payment loan from the sellers of the property, the estate of Merle L. Collings. Contacted at his Newport Beach office, the administrator of the Collings trust, Donald R. Sheetz, declined to discuss the details of the loan, but implied that Baca's name on the mortgage was security enough for him. "I think personally," Sheetz said of Baca, "the county is awfully fortunate to have such a strong, innovative leader in law enforcement."
What's less clear is that Baca got a loan that any Joe Blow could have landed. For an assessment, the Weeklyscoured the public record and then spoke with people in the lending business.
In January 1999, a month after taking office, Baca filed the required Statement of Economic Interest with the state's Fair Political Practices Commission, and claimed, under penalty of perjury, to have "no reportable interests": no investments, no business interests, no loans, no gifts and no real property.ã
Some assets and debts -- such as a primary savings account, or credit-card debt -- are exempt from disclosure, according to Dixie Howard of the state Fair Political Practices Commission. Also exempt was Baca's primary residence, a condo on East Del Mar Boulevard near downtown Pasadena. In Baca's divorce filing, the condo was valued at $175,000, with a $135,000 mortgage outstanding.
In an amendment to his economic statement, Baca disclosed that in 1998 he had taken a "personal loan" of "over $10,000" from Michael Yamaki, a topflight L.A. criminal-defense attorney and one of Baca's leading campaign fund-raisers. Yamaki floated the loan in June 1998, the same month Baca decided to resign from a $160,000-a-year position as commander and campaign full time -- a decision that strained Baca's resources. "Lee wasn't destitute," says one high-ranking campaign source. "But it was a little tight for him."
Baca's financial condition improved considerably after he took office as sheriff in December 1998. The job's $207,000-a-year salary tops that of every other elected official in the country, including the president of the U.S. But Baca still had to pay a hefty percentage of his salary in alimony to his ex-wife, Judith -- $4,500 a month, according to the judgment entered in their divorce settlement, plus an additional $4,200 lump-sum payment, for a total of $58,200 a year. From the documents, then, it would appear Baca is left with a gross adjusted pretax income of $148,800.
The Weekly contacted two mortgage brokers, selected from the Yellow Pages, to see if a potential borrower fitting Baca's financial profile would qualify for the loan Baca received.
Tony Valdez, the manager of GMAC Mortgage, on Ventura Boulevard in Encino, says the key issue is the borrower's ratio of debt to income, which his company likes to find between 40 percent and 50 percent. Given Baca's monthly income of $12,333, "he could look at purchasing a house in the $700,000 to $800,000 range," Valdez says -- exactly in the range of Baca's new home.
Baca's good income notwithstanding, Valdez says that he would not make the loan to Baca, because the sheriff borrowed 100 percent of the down payment from the seller of the house. "Most lenders wouldn't touch that loan," Valdez says. "He more than qualifies in terms of income . . . But I have been doing mortgages for 20 years, and I don't know anybody who would do that loan, because of the down-payment issue. They want to see the guy come in with something in hand."
Bayard figures Baca's income at $17,250 per month, and his debts as $9,800 a month: $4,875 a month for alimony, plus $4,925 a month total payment on a $600,000 loan.
"Presuming he has no other debt, that is a debt-to-income ratio of 57 percent, and that is too high for us," Bayard says, noting that as a bank, his institution follows more conservative guidelines.
Told that Baca also borrowed 100 percent of the down payment from the seller, Bayard adds: "We would have some very serious issues with that. There would have to be very considerable compensating factors, like he had a big investment portfolio, or a huge 401(k). He's got to have serious assets to compensate for no down payment."
In sum, Bayard concludes, "He is a very fortunate man, from my standpoint as a loan consultant, to have gotten that loan. I suppose there are lenders out there that would do it, if they had a reason to."