- Photo by David Rolland
Local Republicans--represented here by San Diego City Councilmember Carl DeMaio, left, and county Supervisor Bill Horn (pictured with U.S. Senate candidate Carly Fiorina) are standing by Lorie Zapf (at podium), warts and all (photo by David Rolland)
Going into the June 8 election, voters have to wonder who’s made the battier financial decisions: San Diego City Council candidate Lorie Zapf and her husband, Eric, who have defaulted on a home loan, or the Republican Party of San Diego County, which just cut her campaign two checks for $10,000 each.
On one hand, you have a candidate whose husband’s real-estate dealings—new information has come to light about a past delinquent tax debt—are damaging not only to the candidate’s credit, but also her credibility as a fiscal conservative. On the other hand, Zapf may be the GOP’s best chance to take District 6.
The $20,000 donation—allowed by a federal judge’s last-minute rejection of the city’s campaign-finance limits—now puts Zapf on an even funding field with the front runner, Democrat Howard Wayne. They’ve each raised about $65,000 this cycle.
The money will certainly impact what is one of the city’s most hotly contested races. A recent poll has Wayne and Zapf getting 35 and 31 percent of the District 6 vote, respectively, which would launch both into a November runoff. (Take that information with a grain of salt: Though conservative blogger Barry Jantz of FlashReport.org and SDRostra.com confirms the poll’s authenticity, the firm that conducted it has not yet been identified.)
But both the poll and the giant Republican cash donation occurred before the news spread that the Zapfs are more than six months behind on loan payments. As CityBeat reported on May 19, the Zapfs stopped paying the interest on a Home Equity Line of Credit (HELOC), a sort of second mortgage on their home, in September 2009. As of this March, they had racked up more than $7,000 in debt and the bank had filed a 90-day foreclosure notice, called a “notice of default.”
Lorie Zapf’s explanations to the press have been vague and contradictory. In some versions of the story, she has cast her family as downtrodden victims of the mortgage crisis, while in other accounts, the campaign claims that the default is something that “often” happens when homeowners try to renegotiate their loans.
Not everyone’s buying that.
Local mortgage-fraud investigator Curt Novy told CityBeat, “I can definitely state [that] the filing of [a notice of default] is not consistent, normal or a standard procedure in changing loan terms from an adjustable to a fixed-rate.”
Attorney Gil Cabrera, who formerly chaired the San Diego Ethics Commission, agreed. Via Twitter, he wrote: “She’s defaulting on a HELOC?! Yea, that’s just bad management.”
With the exception of Ryan Huckabone, Zapf’s opponents are striking hard at her for claiming she’s the candidate of fiscal conservatism when her own home isn’t in financial order. Although one county Republican Central Committee member, John Woodrum, argued in an e-mail to Republican voters—a copy of which was forwarded to The San Diego Union-Tribune—that Zapf’s financial jam gave her a populist appeal, the mortgage default led The Liberator Today, the blog of “the unofficial chief ideologist of the San Diego Tea Party Movement,” to double back on its Zapf endorsement.
“There are two issues here,” the blog’s author, B-Daddy, writes. “First, are the Zapfs guilty of ethical lapses of which Lorie should have known? Second, doesn’t she get that running for office means that her own house must be in order? That she doesn’t seem to, is pretty serious in itself.”
Even county Republican Party chair Tony Krvaric acknowledged in an interview with local news website voiceofsandiego.org that if a Democratic candidate was in a similar position, he’d be all over it.
One Republican who has been conspicuously quiet on Zapf’s mortgage default is City Councilmember Carl DeMaio, who met with Zapf privately twice last year and has “introduced” (but not “endorsed”) the candidate several times at high-level campaign events. DeMaio, who is gay, has said that he forgives Zapf for anti-homosexual statements made in e-mails obtained and reported by CityBeat. He considers her a “strong supporter of fiscal reform.”
But the Zapfs’ financial decisions don’t quite gel with DeMaio’s prescription for responsible money management.
In a 2005 interview with San Diego Magazine, DeMaio equated the city’s underfunding of the pension system with a family defaulting on a mortgage.
“Look at this as if it were a family’s budget,” DeMaio said. “What we did was stop paying the mortgage and didn’t gain more income, but still went on nice vacations. The kids are happy for a year. But then the bank forecloses on your house.”
In 2008, DeMaio repeated the analogy to CityBeat, slamming magical reasoning in City Hall spending: “So the Budget Fairy says let’s not pay the mortgage this month, but let’s take the kids on vacation. How irresponsible is that?”
In this case, the mortgage-defaulting Zapfs didn’t go on vacation—they went into politics.
The current notice of default isn’t the first on the Zapfs’ financial record. In Nevada, Eric Zapf defaulted twice on a mortgage on a second home and was cited three times as a delinquent taxpayer.
Yet, even as he missed mortgage and tax payments, Eric Zapf started giving money to politicians, including $270 to DeMaio in 2007 and $125 to District 1 City Council candidate Phil Thalheimer’s campaign in 2008.
Eric Zapf purchased the second home in a brand-new development in Henderson, Nev., near Las Vegas in 2004. As the subprime mortgage crisis unfolded, he stopped paying his mortgage payments twice, once in 2007 and again in 2008.
He also defaulted on his taxes: On three occasions between 2007 and 2008, the city of Henderson put his property on a list of homes that would be sold because their owners were delinquent in paying “Local Improvement District” assessments, the taxes used to finance infrastructure associated with developments such as housing tracts.
Eric Zapf paid back the debt on the first two occasions, but his lender, Countrywide, eventually paid off Zapf’s final tax debt in order to unload the property at a cut-rate price, known as a “short sale,” to recoup at least a portion of the loan.
“Lorie Zapf is running for City Council, not her husband,” campaign manager Matt Donnellan told CityBeat via e-mail. “The property in Nevada was owned by Eric Zapf. Although Lorie was not a participating party in the property, the bank approved all terms of the sales and bills were paid.”
It’s unclear whether Zapf is still indebted to Countrywide—the campaign has declared that information private.
A board member of the influential conservative Lincoln Club, Thalheimer says CityBeat’s decision to report on Eric Zapf’s real-estate dealings “stinks,” because newspapers shouldn’t report on a candidate’s family.
While it’s true that Lorie Zapf was not a party to the Nevada deal, it’s more than likely she was aware of it. She signed documents relinquishing ownership of the property during the initial purchase and the final sale.
And, at the time of the deal, she was working for her husband’s real-estate firm, EZ Homes & Estates, as a marketing communications manager.
That tidbit was derived from the résumé Lorie Zapf filed with the city in early 2009 after Mayor Jerry Sanders tapped her to serve on the city’s Park & Recreation Board.
(A year earlier, as co-chair of San Diegans for City Hall Reform Steering Committee, she testified for strengthening the mayor’s veto power in front of the City Council. Her husband made a similar speech before the council three weeks later.)
The City Council rejected Zapf for the Park & Recreation post at the 2009 meeting, with Councilmember Marti Emerald all but accusing Zapf of attempting to score last-minute public-service experience as she actively campaigned for a seat on the City Council.
Zapf denied the accusation. “Of course I have given [running for office] some thought, but I have little kids right now…. Yes, I have looked into it. The job doesn’t seem all that great.”
Obviously, Zapf changed her mind about that.
With a $75,000 salary, the job does pay better than her last gig, where she earned $50,000 a year to run San Diego Citizens Against Lawsuit Abuse, an organization set up to advocate and lobby for tort reform.
But running for office has its financial perks, too: Eric Zapf so far has collected nearly $2,000 in “office expenses” from Zapf’s campaign coffers.
The campaign has not yet responded to CityBeat’s request that the Zapfs disclose what services Eric Zapf provided and whether the campaign paid rent on the Zapfs’ endangered home.
UPDATE: On the day this story ran, Carl DeMaio endorsed Lorie Zapf, spurring Donna Frye to call DeMaio a "lap dog." Read the follow up here.
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