Poor return on Lendy due to defaulted loans

I can assume by the fact that you say you have been with Lendy/SS for a fair while now that you understand entirely how P2P lending works.

The first point I would make on your post is that many loans over run their original terms and that is to be expected.  Only after a period of compassion and understanding should any legal enforcement even be considered in my opinion.  If the platform was to start legal proceedings every time a loan went 1 day over terms, nobody would use the platform and then you would have nothing to invest in.

I think you need to read the updates (On here, not on Lendy) on the loans you have that have been in default for 2 years or more. Legal action takes a very long time in this country and cannot be sped up because an investor spits their dummy out.

As for why you got your 1% per month over the first few years but now struggle to get 6.3% per year, well that's easy to understand. You came in when the loans were all fresh and the platform had no defaults. Now the loans are getting older more of them are getting into problems (Problems that you must surely have been made aware of? You acknowledged the T's&C's yes?).

Some of the investors on here dream of 6.3% returns. Most of us have very large sums tied up in Lendy.

Welcome to the wonderful world of P2P.

Well... On the up-side, if it is a duck, it has some chance of surviving the drain I've been suggesting it has been circling since last April.

It isn't only the defaulted loans affecting your measurable return either...the 'Interest Accruing' loans will only be paid on completion or other resolution.  And some of those are currently suspended.  In fact I just made a quick calculation and it looks like nearly a third of all value of loans (£59m out of £187m) are currently not tradeable, either suspended or in default.  That's a lot of our cash currently locked up.  I'm sure someone will correct me if I've rushed my numbers a bit.  I hope I've got it wrong, because it doesn't look good if Lendy are struggling to progress one third of the value of loans outstanding.

A year ago I received 1% a month. Today I got 0.77% and expect it to decline every month as more and more loans arrive to IA and DEF.

They are probably taking some action, but they can't sell the security at the price to repay capital in full and there is not enough in PF (if that still exists) to cover the loss.

I had this conversation with a banker not long ago - a business person had written in to complain about banks not taking risks. He said it's quite easy to work out the defaults they can afford from the banks' net interest margins. The current default rate that his bank was experiencing was below 2% and their margin (on SME business) was around 2.5% so if defaults rise by more than that amount, they are in loss. He said it was a common and understandable error to assume that banks were in the business of taking or sharing risk. The bank aims to be exposed to a very low risk of default and doesn't share any of the upside from success. They make their money by borrowing short to lend long - maturity risk rather than default risk.

Lendy is in a quite different market with much higher risks and returns - more like equity than debt. Also the absolute number of loans is low so a single, large non-performing loan has a material effect on the whole portfolio.

The issue it seems to me is alignment of incentives. This note www.reuters.com/article/idUSFit956064 puts it well: "A lack of risk retention by alternative lenders may affect performance. Marketplace platforms do provide risk analysis but they are not required to retain exposure to the borrower. Regulators have identified potential misalignment of interest between originators and end-investors as a source of risk."

As I understand it, Lendy make most of their profit from the initial fees so there is a strong incentive to originate loans. There is less of a short-term incentive to work with borrowers to keep the loans on track, because that costs money and the main income has been secured. There is definitely a medium-term incentive, because if this is not done well then investors will vote with their feet. Personally I believe that Lendy's management have set out to build a long-term sustainable business and are learning the hard way (as are the investors) what it takes to do that.

so, even by your own admission it is still not Lendy at fault? But more to do with the Sh**e RICS valuations?

If this is the case, then Lendy still don't deserve to be put to the stake by investors as they are taking their time to try to maximise the return to investors (As you have stated above).

So, to combat the absolute incompetence of the RICS surveyors, perhaps we should only lend upto 35% LTV.  Can see loads of business coming in.

As for selling in 3 weeks, I would like you to try and do so with some of the shyster developers that have taken the lenders for a ride.  They have no intention of giving away their rights to the security and will try every trick in the book to do so. This has been borne out by recent episodes involving non attendance at court through ill health!!"  Ill health my a**e. If you think you can expedite proceedings against people like that, please feel free to prove yourself to be better than most of the solicitors working on these cases.