The Death Spiral

First Cycle:
Banks restrict lending a little, borrower can not borrow as much, real estate market stabilize, mortgage default start, slow increase of foreclosure, banks continue to tighten credit / lending, borrower decrease borrowing real estate market goes down, mortgage default rise, foreclosure rise, lending stops (except for best bank clients), real estate market crash (first crash).

Second Cycle:
Market has crash banks are trying to stabilize, managing first cycle losses. Now stable borrowers realized that their property has lost value, they can not sales of refinance, they start defaulting, bank continue to tighten credit even with their best borrower, foreclosure on stable borrower starts, barker start a second depreciation, bank provide only limited lending, markets continue to go down (second smaller crash). There is only so much down that we can go.

The Bottom:
Fresh capital comes into market, investors grabs property for dirt value, tax dollars backed bank lending, market stabilize, bank make loans, borrower can borrow a little, more properties are getting sold, market get support, value slowly start making some gains.

For us hard money lenders everything is based on values. To get a loan today from us we will have to ascertain the value and try to protect ourselves and our investors as much as we can. We also recognize that there is a unique opportunity to make good loans. So be prepared to negotiate, be flexible and you will get funded