When private money lenders in California need to foreclose, are they taking a loss? or if they only lend out 70% LTV, they at least have some equity correct ?
They don't always take a monetary loss. If the property sells at the foreclosure auction, the lender will be made whole with all of the principal balance plus default interest, legal fees, etc. They don't make a profit with an auction sale. The true loss is the time and hassle. If the property does not sell at auction and the lender has to own the property, the idea is they will have some equity so that they can sell the property on their own without taking a loss. This is the reason that private lending leverage is so conservative with the maximum LTV of 70%.
When private money lenders in California need to foreclose, are they taking a loss?
or if they only lend out 70% LTV, they at least have some equity correct ?
They don't always take a monetary loss. If the property sells at the foreclosure auction, the lender will be made whole with all of the principal balance plus default interest, legal fees, etc. They don't make a profit with an auction sale. The true loss is the time and hassle. If the property does not sell at auction and the lender has to own the property, the idea is they will have some equity so that they can sell the property on their own without taking a loss. This is the reason that private lending leverage is so conservative with the maximum LTV of 70%.