Short Sale of Congressman's Home Sparks Political Debate

The "short sale" of Rep. Steve Israel's home in Dix Hills has sparked criticism from his Republican challenger, Stephen Labate, who has claimed Israel received special treatment from his bank.

Israel's office responded that the six-term congressman did nothing wrong and the sale is not unlike hundreds of others taking place in the depressed Long Island housing market.

Samantha Slater, a spokeswoman for Israel, told Patch that Labate's claims were a "cheap political attack."

"This is just a cheap political attack by Republicans," Slater said. "Steve did everything by the books. The initial report failed to note that the person quoted as a real estate expert has a title in his opponent's campaign."

The story, which first appeared in the New York Post, quoted Grace Slezak, president of Destiny International Realty in Glen Cove, as that real estate expert.

In a telephone interview Tuesday, Slezak refused to say whether she had any position in Labate's campaign. She told Patch she was "not being paid" by any political campaign, but declined to discuss any role she had with Labate. She said she stood by her statements in the Post article.

A source in the Labate campaign, who asked not to be identified, confirmed that Slezak is a volunteer in the Republican challenger's campaign.

Slater said the sale of the three-bedroom colonial owned by Israel and his estranged wife, Marlene Budd, closed on Friday, selling for $460,000, some $120,000 less than the couple paid about eight years ago.

The couple is going through a divorce and is selling the home because neither could afford the mortgage and taxes on their own, Slater told Newsday. Israel and Budd, a Suffolk County Family Court judge, purchased the home for $580,000 in 2004. Together with a home equity loan and the mortgage, the couple owed $553,000.

The couple, under the short sale agreement with the bank, no longer have to pay the $93,000 balance.

A short sale is conducted when a lender allows the homeowner to sell their property for less than their outstanding mortgage and usually forgives the difference.

Short sales such as these have become commonplace on Long Island and around the country recently following the collapse of the housing market in the last three years, said Nikki Sturges, licensed associate broker for Daniel Gale Sotheby's International Realty.

"The reality on Long Island and around the country is that banks are trying to work with homeowners who had high mortgages and now find themselves underwater," Sturges said.

Banks agree to the deal because it is typically less expensive for them than going through foreclosure, she said. Homeowners must document strict income and other criteria, she said.

The amount forgiven is also not unusual, she said. "I have seen that happen across the spectrum (of short sale prices,) Sturges said. "There is a big disparity. It depends on what the homeowner owes."

Sturges said she is not affiliated in any way with either campaign.

Labate Campaign Manager Chris Thompson issued an email Monday after the Post story broke, saying the newspaper "exposes Congressman Israel for using his influence to have his mortgage debt reduced by nearly $100,000."

The Post story quotes Thompson as saying the short sale agreement “raises the suspicion of a private deal being made between a bank who received a bailout and a congressman who voted for that bailout.”

Thompson could not immediately be reached for further comment.

Slater called Thompson's statement unfounded; She said Israel ran the short sale past the House Ethics Committee and followed its advice.

"The MLS service says 14.5 percent of home listings on Long Island are being sold in short sales and Steve and his wife conducted their sale the same way as all of those people," Slater told Patch. "They hired a lawyer to negotiate the sale with all parties for a price consistent with comparable homes in the neighborhood."

Thompson's email said JPMorgan Chase "is letting the congressman walk away from his financial obligations to the bank." The email went on to urge voters to contribute to Labate's campaign.

The couple is also trying to sell a home in Washington with a mortgage of at least $250,000, Slater told Newsday.