Park City, Utah (April 23, 2012) – While many banks were forced to close their doors, some have managed to hold on with government TARP assistance. For those banks that are still open for business, bank lending is extremely tight, hence the demand for private money or hard money loans is larger than ever before.
Many local banks and credit unions have stepped up to meet the growing demand for new residential mortgages against foreclosures. But bank lending on commercial properties has slowed down to a near dead halt. An anonymous comment from a commercial banker affirmed, “I’m being forced to turn away customers of 20 years because we just aren’t making commercial loans right now. I’m telling them to go to another bank. This is hard.”
But there is a lot of lending going on out there, but it’s not the banks who are making loans. Most of the lending taking place in the market is in the form of private money lending. In fact, private money loans, sometimes referred to as “hard money” loans, have been crucial to the recovery of the real estate market. Corey Curwick, of Private Money Utah, commented on the massive growth in private money lending in recent years,
“Most people don’t realize the tremendous impact that private money lending has had on the economy’s recovery. Without the availability of private sources of financing in recent years, the economy as a whole would never have seen such a rapid recovery. It just wouldn’t have happened so quickly.”
Damaged credit, loss of income, and other effects of the recent financial crisis are preventing borrowers from obtaining bank loans. Private money lenders approve loans regardless of credit or income because they put more weight on the collateral being used for the loan versus the credentials of the borrower.
Private money lenders have assisted investors to buy large bundles of real estate from the FDIC, from foreclosure auctions, and from the banks themselves. Real Estate Investors who buy these properties are required to purchase them almost overnight. Because private money lenders can approve a loan and deploy cash quickly, they have become the largest player in the recovery of the real estate market.
Although Arizona is one of the U.S. States with the highest number of foreclosures, the Phoenix market has seen a tremendous recovery due to local hard money lenders.
Until banks start to loosen up lending again, particularly in the commercial lending space, private money loans will continue to provide badly needed loans to the marketplace.
Phone: (435) 565-1769