The short answer is “yes,” but we work to exhaust other options to pay investors back before we reach this stage with a borrower.
PeerStreet was designed with investor safety in mind right from the start. To this end, we have multiple layers of checks and balances built into our processes that are designed to uncover potential risks with each loan. We’ve built our organization to handle the many intricate details of managing a loan from purchase to payoff, so you don’t have to be an expert in real estate and loan servicing.
Our in-house Servicing team is dedicated to monitoring loans and distributing payments accordingly. They work directly with borrowers in the case of late payments. Our in-house Asset Management team helps protect your investment if a borrower does not make timely payments on their loan, and are experienced at working through different foreclosure processes in different states—while simultaneously pursuing alternative resolutions with borrowers.
We carefully vet each one of our lending partners with a background check of the principals and a review of their loan origination history and loan performance. For each loan, we carefully check the borrower—whether a company or individual—during our underwriting process. We conduct criminal history searches, credit checks, review entity documentation, and examine a borrower’s past experience. However, even with these processes in place, there are times when a loan will go into default, and we will be forced to move into foreclosure proceedings. Events such as the death of the borrower and natural disasters can also happen without any predictability.
PeerStreet holds the loan, or the “note,” on investments offered on the platform. This note is typically in first-lien position on the property, meaning PeerStreet is the first entity to receive proceeds from a foreclosure (after deducting foreclosure costs).
In the event PeerStreet has no other choice but to foreclose on a property, we move quickly and decisively to try and provide closure to you and everyone invested in the loan as soon as possible.