patrick.net

Call it Crazy says

f you want a nice "family area" you should look at Monmouth County. It is a train ride to Rahway. It depends on what type of commute you want but neighborhoods and pricing is better than Union County.

I lived in Keyport 20 years ago (on beers st which my friends still laugh about). I really liked it. If you are talking about commuting on the train stay away from the southern parts of the county. Below the Matawan station the trains stop at every single town and it takes forever. Above Matawan there aren't that many stops.

I don't know what it's like today, but I rented in Cateret in 94 and it was a real sleeper. Used to be a real good family town, totally on it's own that almost no one knows about. Not very upscale, but had some good places.

Call it Crazy says

tatupu70 says

I looked at Monmouth county and hated it. It was full of snobby folks in their McMansions. Even the realtor was a snob. Not my cup of tea.

Ha Ha, you must have been looking in Marlboro...

So true.

Call it Crazy says

They are holding shitty liabilities, but they are holding them on their books at the original "mortgage" value, which is higher NOT at the current "market" value, which is lower. Because of the f*cked up accounting rules, it looks better on their balance sheet to hold the mortgage versus posting the loss when the REO is sold...

I think I understand the assets and liabilities aspect of a bank’s books. I am not completely clear on when they have to declare things and when they have to act.

The bits and pieces of information I have are below. I am not sure of the accuracy. If anybody can definitively and accurately verify any of it, it would be appreciated.

1) By law, before the housing crash, banks used to have to sell or put up for sale a repossessed property within 6 months of taking possession. It is my understanding that this law has either been changed so that banks no longer have to do this or the law is not being enforced.

2) Banks are not required to accurately value properties that they hold mortgages on or have repossessed. They do not have to “mark to market”.

3) The minute a bank repossesses a property, the property moves from their asset sheet to their liability sheet.

4) There seems to be no law requiring repossession by a specific time or calendar duration. It seems like a bank can hold off on repossession as long as they like. Is that true?

5) There is some law about banks having to send and make public a notice of default on a property where payments have been missed for some period of time, 90 days I think.

#2 seems to give bankers all kinds of leverage. As an asset, they can leave the price at a previous high. This artificially makes their books look good. When they move the property to the liability column, they lose that asset but they can offset that problem by marking down the value of that property and reducing their liability, again, artificially improving their balance sheet. Does that make sense?

If #3 is true, I would understand not repossessing but I would not understanding holding a property that has been repossessed unless a bank was somehow otherwise increasing their assets. My limited understanding is that banks are having difficulty managing their balance sheets.

It seems like I am missing pieces of the puzzle.

Biff

Call it Crazy says

I agree... he should look in northern Monmouth, maybe Matawan Aberdeen, etc. It would be a easy shot up on the train to Rahway and I think he'll find better house prices than Westfield area.

FWIW, great schools rates Matawan Regional High School as a 4. NJ Monthly has them a little higher (above average), but the schools worried me a little. Especially coming from out of town....

bob2356 says

Below the Matawan station the trains stop at every single town and it takes forever. Above Matawan there aren't that many stops.

I think Long Branch is still safe; it's the stations south of there where you run the risk of having to wait an hour for a train.

(Now when will NJ Transit bring back the off-peak round trip discount ticket? It now costs $30 (!) for a round trip from Long Branch to New York no matter when you go; no off-peak discount!)

tatupu70 says

Call it Crazy says

I agree... he should look in northern Monmouth, maybe Matawan Aberdeen, etc. It would be a easy shot up on the train to Rahway and I think he'll find better house prices than Westfield area.

FWIW, great schools rates Matawan Regional High School as a 4. NJ Monthly has them a little higher (above average), but the schools worried me a little. Especially coming from out of town....

So go a little further to middletown, very well ranked. Henry Hudson over in Highlands used to be considered very good. I really liked that area, I rented just over the bridge in Rumson. If you kids had any interest in a career in marine science the Marine Academy on sandy hook is supposed to be a fantastic high school.

Obligatory:

http://www.smiteahippie.com/wp-content/uploads/2011/12/NJ_map.jpg

BoomAndBustCycle says

Housing Patrolman says

That's right. Why buy a house now as prices are falling? Buy later after prices crater for 65% less.

And you will be unemployed along with 60% of the population if home prices cratered that much more.

Yup, that is why my gold and swiss francs will buy many houses in the future. :) My new job will be learning how to use a rifle to keep all the homeless off my properties.

zzyzzx says

http://www.smiteahippie.com/wp-content/uploads/2011/12/NJ_map.jpg

Great map, perfect. Someone did a lot of research.

BoomAndBustCycle says

And you will be unemployed along with 60% of the population if home prices cratered that much more.

explain how a drastic decrease in the cost of living in a consumer based economy would lead to high unemployment.

Mick Russom says

explain how a drastic decrease in the cost of living in a consumer based economy would lead to high unemployment.

Were you paying attention in 2009? It already happened.

The problem is it's not just a lower cost of living, it's also a LOT of people losing a LOT of money.

Appraisers Are Corrupt says

How are people "losing money"?

Wow. Are you really asking that? When someone gets foreclosed, the homeowner loses money and the bank owners lose money.

Appraisers Are Corrupt says

How is the borrower losing money?

What are you talking about? Which borrower?

tatupu70 says

Call it Crazy says

I agree... he should look in northern Monmouth, maybe Matawan Aberdeen, etc. It would be a easy shot up on the train to Rahway and I think he'll find better house prices than Westfield area.

FWIW, great schools rates Matawan Regional High School as a 4. NJ Monthly has them a little higher (above average), but the schools worried me a little. Especially coming from out of town....

My high school English teacher is an administrator at Matawan. It's not a bad area. Trying to get into a good school district in this state ends up costing you an extra 200k. The district that I teach in, is probably #2 or 3 in the state. As a result, a home that would go for 400k in any other town, which is already overpriced, ends up going for 1.2 million. Welcome to NJ where you live like a bum with a household income of 120k.

I completely agree with the realtor that prices have hit bottom.
This bottom will hold for at least 15 minutes. LOL

tatupu70 says

Appraisers Are Corrupt says

How is the borrower losing money?

What are you talking about? Which borrower?

Wow. Scintillating conversation. Congrats, guys.

bob2356 says

That's only half the story. As long as the loan is on the books the banks can claim the full value of the loan as an asset. If a house sells for less than the loan value the loss must be booked. Bankers that book enough losses to miss performance numbers get to see their bonuses go by by. So things are being carefully trickled out.

I think that's the best explanation so far. Also when you write off bad loans you are hitting the overall bank profit on the P&L. They have to have enought revenue from the other sources to offset these bad debts expenses and still show the profit. So, they release them slowly and according to their internal performance planned vs. actual numbers. It is just a number game to always look good to the stockholders and outsiders.

Biff Baxter says

#2 seems to give bankers all kinds of leverage. As an asset, they can leave the price at a previous high. This artificially makes their books look good. When they move the property to the liability column, they lose that asset but they can offset that problem by marking down the value of that property and reducing their liability, again, artificially improving their balance sheet. Does that make sense?

Bank accounting is not my cup of tea, so maybe I'm wrong but my understanding is that there are two sides of each transaction including writing off bad loans, one site is you lower your asset and the other site is you increase your expense - Bad Debt. When you increase that expense account you are hitting your P&L for the given year. Let's think about it like you run a regular business and you need to write off A/R aging because you know you won't collect money on your bad clients.
You can do it as long as you are not overduing it. What it means not too much too soon in any given year because on the accrual basis it would put you in red (loss/not profit)

Revenue - Expenses = Profit/Loss.

So you have to have enough revenue to write off some of these loans to still make profit.

There is one more thing which I don't understend, in the regular business each Account Receivable (Asset) has a contra account called Allowance for Doubtfull Accounts,

Balance Sheet

Asset
(Allowance for Dobtfull Accounts)
+Asset
+Asset

(Liability)=

Equity

so that account automatically lowers your Asset account because you ESTIMATE how much write offs you are going to have during the year. This same must be with these loan asset accounts for banks. They should have some contra-asset account which should account for their future losses and lower their asset immidiately. The estimate is only what it is, you can artificially lower it but at the end of the year you should adjust it to the reality.

All of it is a postponment game

OK, I found some more about that topic. Estimated losses should offset that loan asset account. It is a manipulative tool for bankers. Managers have incentive to keep these losses low to inflate their Income Statement and their own bonuses. They also don't need to increase their equity capital to absorb unexpected losses.
Accounting standards require the estimates to be as close to reality as possible, but, there is always but...

There are exeptions when,
1. the loans are securitized and traded in financial markets
and
2.the loans are hedged by a derivatives contracts.

I'm not going to that discussion because it is too complicated but a lot of these loans have one of these two forms and banks can adhear to different set of rules or no rules at all with dealing with these instruments.