An article in The Wall Street Journal by Robin Sidel highlighted the superiority of private mortgages over traditional lenders.  In the Wall Street Journal piece by Sidel, “After Years of Growth, Banks are Pruning Their Branches,” focused on the decreasing presence of banks in communities across America.  At the same time, private mortgage lending is readily available.

private mortgages

The article reported that over 2000 branch offices of banks were shut down in 2012.  That deprived the local communities of the services of traditional lenders for the financing required for real estate buying, among other needs.  In addition to the dwindling number of physical locations, it is becoming much more difficult to secure a mortgage as traditional lenders such as banks, credit unions, and mortgage brokers have tightened up standards since The Great Recession.

As an alternative that is superior in so many ways are private mortgages for purchasing real estate.  A private mortgage is a loan from an individual or group of investors to buy a property.  According to Jerry Cohen, President of EquityBuild, a premier private mortgage investment firm, “There are two methods for getting started in private mortgages: Mortgage Pools and Direct Lending.  Mortgage pools are like the mutual funds of private mortgages. Each investor's money is pooled with the other investors participating in the pool and the money is used for private lending.”

Cohen, who was just awarded the prestigious “Moving America Forward” honor for the success of EquityBuild and EquityBuild Finance, its financial arm, furthered that, “Direct lending is typically reserved for seasoned real estate professionals due to the level of expertise that is needed to identify undervalued properties...”

It is the experience of private mortgages that makes these loans so much better than those from a bank, credit union, or loan broker.  The private mortgage lender moves much quicker than a bank, credit union, or mortgage broker.  There is no waiting for the monthly loan approval committee to meet.

Based on The Wall Street Journal article, the opportunities in private mortgage, whether from direct lending or a pool, should only increase.  At present, according to AlixPartner, a financial research firm, there are 93,000 bank branches in the United States.  That is the same number as for 2007.  It is projected by AlixPartners that the number of branches will drop to 80,000, the amount from 2000.

That will leave many communities and borrowers without access to the lending needed to buy a property from a traditional source.  For both investors and borrowers, private mortgages will be needed to fill the gap.  The flexibility of a private mortgage will make the departure of the local bank branch much easier to forget as the terms can be customized to suit the needs of the borrower and lender.

Traditional lenders failed the marketplace, resulting the housing collapse that brought about The Great Recession.  Loans were made just to generate profits, not to serve the best interests of the borrower and the lender.  Now traditional lenders are again failing the marketplace by leaving communities without any local  source for mortgages to buy properties.

Private mortgages succeed here where the traditional lenders fell far short.  A private mortgage is made to set to the terms that meet the needs of all parties involved in the transaction.  Many times the individual or group financing the private mortgage has ties to local community and understands the real estate market in the area, resulting in the desire to lend the money to buy the property.  While banks may be withdrawing from markets that need the financing to buy homes, private mortgages can step in to serve the desires of the community.

by, Jonathan Yates: EquityBuild News Contributor