BPF585

anybody else wants to sell up, i'll take it off your hands

I respect mrclondon as one of the most useful contributors on this forum, so appreciate his engagement, and I'm also happy to hear comments about how we could have done things better which we can learn from. I do feel I have to take issue when words like 'sweep under the carpet', 'underhand' and 'mis-representation of security values' are used. These go so strongly against our core values as a business that I want to go into some detail here in response. We try to do multiple things driven by commitment to integrity, openness and lenders' interests - our first loss investments, LTVs using the higher of the latest formal valuation and the maximum LTV permitted, offering to buy out investors etc. So I take the question of integrity very seriously. I can see that there are other ways we could have handled the extension. However, I completely reject the idea that there was any intent to mislead or misrepresent.

The loan in question was due to repay on 13 November 2016. Our initial plan was to repay lenders and fund the extension elsewhere (we have other investors who were happy to take the loan on). However, given that there seemed to be appetite for our loans on the platform and possibly a dearth of other loans, we decided to give lenders the choice of staying in the extension, despite this meaning leaving £75,000 of our own funds invested (first loss) which we could have freed up by placing the loan elsewhere. If I were a lender, I would have appreciated having the choice of staying in the loan, and I'm committed to developing our relationship with platform lenders. I saw keeping the extension on the platform as a positive for that relationship. At the same time, we committed to buying out anyone who wished to exit on the initial date.

We had booked in a revaluation from the original valuer which we wanted to upload before the renewal. This valuer was ill, so we had to try to schedule at short notice a new valuation. This was carried out, but not in time to receive the report itself (which were still waiting for). Before the loan was listed and the extension email sent out, the valuer confirmed to us verbally that he was going to set a value in the range £565,000 - £595,000. This was sufficient for us to feel comfortable with allowing the renewal to go ahead. Late on Friday, after the loan was listed, he came back to say that he was most comfortable setting it at £565,000. We thought it best to wait until we had the report itself before posting an update, which is why we did not post the information straight away. However, when lenders asked about it and it became clear we would not receive the valuation early on Monday, we posted the update.

I have no objections to anyone suggesting we should have posted this information on Friday, though I hope it's understandable that we preferred to wait until we had sight of an actual valuation report. I reject, though, the idea that we were trying to sweep anything under the carpet. This simply isn't true. My view at the time was that seeing an update of the valuation to £565,000, giving an LTV of 57.5% (down from 68.4% in the initial loan), along with confirmation from the valuer that the build quality was high, would be a positive in risk assessment of the loan, since up to that point (and in the headline details for the extension), we had only used a valuation of £475,000. I recognise now that some lenders may have seen it differently, since they believed the valuation would come in higher. As a result, we extended our commitment to buy out any lenders who wish to sell to 24 hours after uploading the valuation. We could indeed have bought out the loan in full, then released it onto the platform later, but this would have prevented anyone with a holding in the loan from rolling it, and left them in the same position as all other lenders. Given that we have committed to buying out anyone who wishes to sell, I'm not sure there would have been any advantage in doing this (apart perhaps from giving other lenders a better chance of getting a holding in the loan).

To repeat, I now think it would probably have been better to post the verbal updates from the valuer as soon as we had them. I've taken action (extending the buyback period). There was no attempt to mislead. Any investor who wishes to be repaid now will be repaid. We continue to hold £75,000 of our own money in this loan, which we'll lose all of before any MT lenders lose a penny, even though we had the opportunity to be bought out in full by our other investors (who do not benefit from a first loss buffer).

Thanks Ben, good response, I'll keep my £16

We've now received and uploaded the valuation.

The valuers don't go into detail on how they derive the value, though they include comparables. They refer to works outstanding on the property - these are works decided on by the borrowers whilst marketing the property, subsequent to the main works being completed. The valuers estimated to us that they would take 3 days to complete. Works remain outstanding due to delays in the delivery of the improved windows.

Given the late receipt of the valuation, we've extended the period for buying out any investors who wish be repaid to 17 November.

I second the comments made by James.

Through a combination of circumstances, the information available to (potential) lenders was not of the quality that any of us would prefer. Ben has accepted this and has said that they will take steps to stop it happening again in the future. They are extending the buyback period if anybody does want out, which should mitigate any adverse effects for any lenders. For me, I am happy with the way that Broadoak are trying to resolve the issue and for me this draws a line things.

I have great respect for mrclondon and have learned a lot from his sage words. I can see his point of view regarding this but hope in hindsight, he will be able to appreciate that there was no malicious intent involved.

The wider point about valuations across all of P2P does need to be addressed. If the original valuer had been available to re-asses this, he may well have given a higher valuation and we would not be having this discussion now.

We have no reason to think the floor area in the original valuation was incorrect.