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Post by savingstream on Sept 2, 2015 10:15:17 GMT
Finally we are able to release the Lender T & Cs to you for your review. These have been signed off by Grant Thornton and also Clarke Willmott LLP who confirm that this new structure will stand up as a P2P platform and your security will be treated as such. We intend to go live with these T & Cs next week, you will not have to do anything.
Old
You lent to Lendy Ltd who then lent to the borrower.
New
When you invested in a loan, we kept detailed records of this, but an administrator may consider it a pari passu risk (http://www.investopedia.com/terms/p/pari-passu.asp) in the event of Lendy Ltd’s (highly unlikely) bankruptcy. One bad loan, could in theory, undermine the rest.
When we become a Pure P2P platform, you lend to the borrower via Lendy Ltd and a “nominee company” called Saving Stream Security Holding Ltd (SSSH Ltd), holds the security on your behalf. The purpose of the nominee company is to manage the investment on behalf of all the Lenders so that the borrower only has to deal with a single entity rather than 1000’s of individuals which will constantly change as the loan parts are traded.
This mitigates bankruptcy risk and one bad loan will not affect the others. Saving Stream will act as the agent and will manage - the origination of the loan, underwriting decisions, raising the capital on behalf of the lenders, perfecting the security, collecting repayments, distributing repayments to Lenders, paying monthly interest, managing the Lender database and various other activities on the Lenders behalf.
Old
Lendy Ltd was responsible for covering all repayments and shortfalls as it acted as both the borrower and the lender to SS lenders.
New
Now you are lending to the Borrower directly (via SSSH Ltd), Lendy Ltd no longer have any legal responsibility for covering any shortfalls. Lendy Ltd will return to the Lenders whatever is returned following disposal of the asset. Any shortfall should technically be absorbed by the Lender as a normal part of business.
However, Lendy Ltd has agreed to maintain the Provision Fund of no less than 2% of the outstanding loan book i.e £35m loan book/ £700k provision fund that will be used to cover these shortfalls at the discretion of Lendy Ltd’s Directors. So far to date, we have had 1 default and managed to sell the property for almost the full valuation figure.
Old
If a loan went into Default, Lendy Ltd continued to pay interest at the normal rate of 1% per month.
New
SS Lenders will continue to earn interest, but it will accrue, rather than be paid on a monthly basis out of Lendy Ltd’s working capital. Once the loan is settled, interest and capital will be paid at that point to the extent that it is fully recovered (then the Provision Fund should step in to cover shortfalls subject to our discretion). It will still be possible to sell out of a defaulting loan, however, any interest earnt after the default has been declared will remain on your accrual account for redemption on settlement.
The purpose of this is to prevent a cash-flow risk to Lendy Ltd i.e paying out interest that hasn’t been collected from the borrower could create a credible risk to the platform.
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registerme
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Post by registerme on Sept 2, 2015 10:23:02 GMT
That's very good news, thank you  . |
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arbster
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Post by arbster on Sept 2, 2015 10:28:40 GMT
Is it fair to assume that existing holdings will be subject to these same T&Cs? That is, should we all be doing some belated DD on our holdings that wasn't necessary under the old structure?
Also, providing greater levels of control over the new pre-funding model is IMO an even more urgent requirement now.
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SteveT
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Post by SteveT on Sept 2, 2015 11:15:25 GMT
Nifty timing vis-a-vis FC's dramatic lurch to lowest common denominator lending announced today! Should be plenty of wiser money looking for a new home very shortly.
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webwiz
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Post by webwiz on Sept 2, 2015 11:21:32 GMT
I can't see anything prohibiting bots or any other form of systematic trading. Anti-bot procedures need to be built in to the software, but banning them in the T&C would also be worthwhile IMO.
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Post by meledor on Sept 2, 2015 11:23:02 GMT
Excellent. We lend directly to the borrower and Saving Stream act as agent. True P2P. I now intend to lend much more through this platform.
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SteveT
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Post by SteveT on Sept 2, 2015 11:27:19 GMT
Have you given any thought to what principles the Directors will apply if / when the Provision Fund is called upon in the event of a Default? Will it look to return capital only, or capital plus default interest? Is there a maximum proportion of the PF (or of the defaulting loan) that will be paid out at once ? What if 2 or more defaulting loans are all to the same Borrower?
And when / how will Lendy Ltd replenish the PF in the event of a payout (or multiple payouts)? If the PF is insufficient to cover a particular default in full when it occurs, will any shortfall be considered for subsequent rebursement at a later date when / if the PF is replenished?
My concern is that the first default or couple of defaults may covered OK but then the PF could be left empty / deplenished to the detriment of any subsequent defaults.
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registerme
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Post by registerme on Sept 2, 2015 12:11:45 GMT
Well, related to that SteveT is that the provision fund used to be held at 2% of the outstanding loan balance, and that if it exceeded this amount SS would draw down on it. So I guess my question is that if there is a default, and the provision fund pays out, will SS inject monies into the provision fund to bring it back up to 2%? |
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Post by nickthefool on Sept 2, 2015 12:20:53 GMT
Have you given any thought to what principles the Directors will apply if / when the Provision Fund is called upon in the event of a Default? Will it look to return capital only, or capital plus default interest? Is there a maximum proportion of the PF (or of the defaulting loan) that will be paid out at once ? What if 2 or more defaulting loans are all to the same Borrower? And when / how will Lendy Ltd replenish the PF in the event of a payout (or multiple payouts)? If the PF is insufficient to cover a particular default in full when it occurs, will any shortfall be considered for subsequent rebursement at a later date when / if the PF is replenished? My concern is that the first default or couple of defaults may covered OK but then the PF could be left empty / deplenished to the detriment of any subsequent defaults. My concern is regarding the provision fund as well - they seem to have changed the wording more to specifically say that we should expect some capital losses, and highlighting that the provision fund is entirely discretionary. It would be much more comforting to have something set out regarding what we should expect the PF to be used for, as per your examples, will it replace capital only, and how would it approach multiple defaults? Personally I was happier lending direct to Lendy, though I'm aware that I'm in the minority here.
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Post by xyon100 on Sept 2, 2015 12:28:57 GMT
You're not actually, Nick. Now I wonder if there is less pressure on SS when it comes to due diligence. It's now our money. I have just disabled pre-funding, I don't want any swamp land no matter how rich and clever the borrower is.
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Post by xyon100 on Sept 2, 2015 12:32:19 GMT
Well, you might be in a minority, Nick, but you're not alone. Now I feel MUCH more responsibility to do due diligence on any loan which means more work and I also feel that SS can be a little bit more brave with our money, meaning yet more due diligence. The changes are certainly a mixed blessing, at least I think so.
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SteveT
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Post by SteveT on Sept 2, 2015 12:42:26 GMT
I can't see anything prohibiting bots or any other form of systematic trading. Anti-bot procedures need to be built in to the software, but banning them in the T&C would also be worthwhile IMO. I hope any bot-users will be rapidly kicked out under new T&Cs clause 14.2.16 (d)  "14.2.16 you use the Saving Stream platform in any of the following ways: .... (d) to cause annoyance, inconvenience or needless anxiety; or"
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11025
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Post by 11025 on Sept 2, 2015 12:48:56 GMT
SS Lenders will continue to earn interest, but it will accrue, rather than be paid on a monthly basis out of Lendy Ltd’s working capital.
I don't know if I have misconstrued this , does this mean interest paid at end of loan term then ?
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arbster
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Post by arbster on Sept 2, 2015 12:50:36 GMT
SS Lenders will continue to earn interest, but it will accrue, rather than be paid on a monthly basis out of Lendy Ltd’s working capital.
I don't know if I have misconstrued this , does this mean interest paid at end of loan term then ? This only applies to loans in default.
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11025
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Post by 11025 on Sept 2, 2015 12:55:18 GMT
Cheers. Multi tasking badly !
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