Go On Chuck Long...Take The Money And Run

By LCR Contributor Barrell Rider

Former San Diego State head football coach and current Kansas University offensive coordinator Chuck Long recently did a short sale on a property he owned in Poway, Ca. The property sold for 850,000 dollars over 500 thousand dollars less than Long paid for the property in 2007, when he purchased it for over 1.3 million dollars.

Chuck Long was the head coach at San Diego State from 2006-2008 where he was paid the handsome sum of 700 thousand dollars per season on the taxpayer’s dime. He went on to coach the Aztecs to an abysmal 9-27 record.

Long was fired near the end of his third season in November of 2008. Although unemployed in 2009, Long still received 715,000 dollars from SDSU as per the terms of his original contract. What he did with his time is a mystery to me, perhaps work on his golf handicap, or take up a ceramics hobby. Perhaps he spent his free time wondering how to spend his rather large money for nothing paychecks paid for by San Diego State University, a healthy portion of which was undoubtedly funded by the California taxpayer.

2010 brought forth-new opportunity for coach Long, who received a job as the Kansas Jayhawk offensive coordinator, a position that pays him 350 thousand dollars annually. In 2010 Long once again made over 700 thousand dollars, 350 came from Kansas and 365 thousand came from San Diego State who was originally on the hook for two years salary upon his dismissal.

So from 2006 to present Chuck Long has made about 3.52 million dollars.

What Chuck Long didn’t do in 2010 was pay his mortgage. In August of 2010 Long quit making payments on his Poway property. In late 2010 a notice of default was filed and the property was to be auctioned off last week. At the last minute a short sale was negotiated and the property avoided auction, selling for the discounted price of 850k.

Chuck Long took the money and ran. His performance at SDSU was dreadful and despite never losing a dime in income, for some reason he quit making payments on the property. Perhaps Long could not find a buyer or a renter for his high priced digs in Poway CA, Long presumably relocated to Kansas sometime in early 2010 to begin his new job.

What Long did has been dubbed a ‘strategic default’. A strategic default is the decision by a borrower to stop making payments on a debt despite having the financial ability to make the payments. These are becoming more and more common as real estate values continue to drop nationwide. The phenomenon is yet another contributing factor in a declining real estate market.

Running the numbers on a mortgage on loan of approximately 1.25 million dollars, it is likely that Long’s mortgage, including PITI was in the neighborhood of 8-9 thousand dollars per month or around 100-108k annually.

There is split opinion on the ethics of a strategic default. In the case of Chuck Long, I think the man has acted unethically, possibly criminally and fraudulently against the taxpayers of California. Not only did he collect over a million dollars while not even working, he willfully refused to pay a mortgage. The consequences of ‘strategic defaults’ include further reduction in home values and increased lending costs.

The situation of Chuck Long also raises concerns over coaching salaries, which have increased significantly the past decade. In many states, the highest paid state employee’s are the football coaches at state funded schools. In many of these situations the coaches operate a football program that is profitable and funds other programs for athletics and academics. This was not the case with Chuck Long.

Should real estate values continue to fall, strategic defaults will likely continue to rise. People who wish or need to move and cannot sell due to decreased home value will likely be one of the main groups perpetuating this trend.

State laws often dictate whether a loan is a recourse loan or not. California is best known as a non-recourse loan state that makes it hard for lenders to sue. Some states give lenders flexibility in how they pursue defaults, but many lenders choose not to sue because defaulting borrowers often don’t have much to sue for. In cases where there is no loss of income or financial reason why a borrower cannot pay, there should be stiffer penalties and not just a hit on credit scores.

As an avid college football fan and a California homeowner, I am both disappointed and outraged at conduct such as Long’s. Too bad he will live high on the hog in Kansas off 350k a year, despite a credit rating in the high 500s to low 600s.

1 comment:

  1. While so-called strategic default is less than favorable, it is part of a proper free market.
    The lender provided a loan for a piece of property at a certain value. If the loan defaults, the lender then forecloses and receives the property.
    Protecting lenders from default is what caused the housing bubble. They were able to sell bad loans to Fanny Mae. If lenders took the hit, they wouldn't give out the loan unless they knew the property was worth the price.


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