If you want an example of the old school philosophy between doing whatever it takes to pay ones mortgage to the new school “lets just walk away from the home when it is upside down”, we need to take a look at rapper Chamillionaire.
He is definitely in the walking away camp.
This could be scary as a new generation sees the housing market not as a person’s castle and lifelong goal but as a disposable asset. The need to invest, manage, maintain, and let us be honest, pride of ownership, is a big part of while housing is successful in the country.
That goes away, like it has with Chamillionaire and others, we are going to have bigger problems with housing than just a downturn.
TMZ has learned Chamillionaire lost the 7,583 sq. foot home — which he picked up for roughly $2 million back in 2006 — after failing to make several payments.
But, yesterday in New York we spoke with Chamillionaire — real name Hakeem Seriki – who told us he “decided to let that house go” because the real estate market had turned and the house had become a bad investment.
Chamillionaire also noted that he was never at the home because, “I was always on the road touring” adding, “I just didn’t feel like it was a good business investment to pay that much mortgage for a house I was never at.”
But Chamillionaire claims he’s far from broke — quipping, “I still got all the cars.” via TMZ
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{ 9 comments… read them below or add one }
I have heard of people doing this quite a bit more in higher cost situations. A collegue of mine said this is becoming a common theme in southern California, where housing has busted. Most young people tell him that their credit will be shot for a few years, but so will most people’s.
I wonder if Chamillionaire actually knows what an "investment" is? I doubt it…
@ Jason – Can you define an investement? I think there are a lot of people now who question whether a house is an asset or a liability. It doesn’t generate income and in a normal market situation (not a bubble) the increase in value is typically behind or at the rate of inflation. Call it the Rich Dad / Poor Dad generation of investors. Why would anyone deplete their savings or retirement accounts to pay for a mortgage they can’t afford, and may ultimately end up losing anyway? Doesn’t seem logical. I think he made the right decision. Walk away from bad investments…
@Big Bob — ?? It is simple. The land&house are assets and the loan from the bank is a liability.
Foreclosure is more than just selling an investment at a loss! It is breaking a contract between two parties (homeowner & bank). It indicates that the homeowner *cannot be trusted*. It undermines the foundations of everything that is important in our society. Without trust, our institutions degrade, our laws lose strength, and the 'contract' is weakened.
Nothing is more important to human civilization itself than the ability to enter into a contract with another party in good faith!
So please use your head before embarrassing yourself by arguing that it 'doesn't seem logical'. Does civilized society seem logical to you?
@Jason Sandquist — I wonder if he knows what makes countries such as ours great? I doubt it.
It is breaking a contract between two parties (homeowner & bank). It indicates that the homeowner *cannot be trusted*. It undermines the foundations of everything that is important in our society.
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@Joe
You have no idea what you're talking about. A longstanding principle of contract law is that people MUST be able to break contracts. It's called "efficient breach." In fact, if you put a clause in a contract that tries to punish someone for breaching it beyond your actual costs, a court will likely invalidate it. Breaking contracts is the American tradition. It keeps our economy flexible in changing circumstances.
So how can we all possibly break contracts and keep the world from collapsing? Intelligent lending standards and demanding collateral before lending. I know, novel concepts that the banks threw away out of greed during the housing bubble.
@Jason Sandquist – Why wouldn't Chamillionaire know what an investment is? He is college educated and has owned several businesses.
@Mike
You're right, collateral really would have prevented us from this mess. Not only would we have done far fewer loans because most of the buyers a few years ago did not have a down payment, but it would also act like skin in the game. I think what Big Bob was saying is that it was unethical what chamilionaire did.
Chamillionaire very business savvy. Also when you are rich, you don't personally handle your finances, you have a team of accountants and professional investors oversee your accumulated wealth (business, properties, and belongings), or in accounting terms "plants, property, and equipment". Cham is not the first to do this, many people are walking away from mortgages higher than the asset value. He just happens to be more famous than the others.
This oxygen thief should have to change his name to Chahundredaire.