Disasters such as the COVID-19 pandemic are often unplanned events whose impacts on the economy remain sustained even after they are gone. However, in periods such as that of the pandemic similar to the Great Recession of 2007, institutional lenders have been observed over the years to be quick in clamping down the flow of money, particularly in sectors such as Real Estate. In situations like this, private lenders are often the only source of reliable funds for investment in the sector.
With the pandemic disrupting much of regular economic activity across the sector, thus leading to loss of jobs and drops in prices of real estate, citizens are left with no choice but to rely on Governmental programs such as the $1.8 trillion package approved by Congress in March of 2020 as a means of intervention to pay rents and mortgages to prevent a massive economic crisis in the real estate market.
However, this is hardly enough or sustainable. For instance, over 10 million Americans were behind in their mortgages and rents at the beginning of 2021. This is why private lenders such as individuals, IRAs, and hedge funds have shown they can step up and fill the void when the government’s funding gets exhausted or other institutional lenders give up.
In addition, private lenders are better equipped to deal with more difficult situations because their definition of risk and investment success lies in the equity of a property rather than the borrower’s credit score. For instance, in the United States in 2012, Privately funded multifamily property loans climbed by 22% from 2011, while privately funded retail property loans increased by 17%.
Click here to gain more insights on how private investors come through in times of economic distress and keep on the wheels of the real estate sector and the economy at large in shape.
Note Servicing Center provides professional, fully compliant loan servicing for private mortgage investors so they can avoid the aggravation of servicing their own loans and just relax and get paid.
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