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Can Real Estate Lenders Be Successful?

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The latest from Net Gain Real Estate.

Real estate lending and success continue to be an ongoing dichotomy. Success still seems to elude real estate lenders. Because NetGain is concerned about the real estate industry, and because the success of real estate lenders is vital to the overall economy, this essay is being addressed to the real estate lending industry. Real estate lenders continue to be an enigma. They have stated that their objectives are to maintain the integrity of capital and to secure a fair return on loans, but from our recent experiences and observations, the problems which haunted real estate lenders in the past still exist.

Today, subprime lending has affected the single-family housing industry. During the 1970s, it was construction loans that caused overbuilding in the apartment sector. During the 1980s, tax incentives resulted in the Saving and Loan industry creating mortgages for commercial real estate based on artificial values. During the 1990s, lenders provided construction loans and mortgages for office buildings where space was occupied by Internet companies with no product, management or future. In all instances greed misdirected the energy of the lenders to turn a blind eye to the true intrinsic value of the real estate, and to sound lending practices.

The recent record delinquencies and foreclosures in the single-family housing market have forced lenders to make changes. Unfortunately, most of the changes that have been made do not address the core problems. Consequently, the real estate lending industry will continue to perpetuate its problems.

For the full essay, go here.

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Elaine Misonzhnik

Senior associate editor Elaine Misonzhnik has been writing for National Real Estate Investor since June 2006 and has covered commercial real estate for more than 12 years. She first became...
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