MONTHLY BS

I have a feeling that Lendy do not want to make the IFISA open like their current market. I have this fear (based on the survey they made some time ago and their general approach of selfishness, even against Lender's interest) they are looking to offer something more packaged/obscure. They will probably target the 40%ers and offer fixed bonds etc. 

Go on! live a little. You had worse to contend with in the forces😉

Found the newsletter largely relevant ie reiterating recoveries and hires. They’re pretty insistent on Paignton and maybe Wolverhampton finally redeeming within 4-6 weeks which would overhaul sentiment on the SM in the short term. Big auction day mid Feb so might also get some movement on some of the problem children which may help medium term sentiment; there may not be unadulteratedly good news but would at least progress cleaning up some of the mess in DEF.

Why do people/ companies take out loans they can’t repay. I understand that there is occasionally unforeseen circumstances, but surely not as frequently as Lendy loans are going bad. As we stand, default and suspension is a lot more common than repayment. When a loan repays we celebrate as though we got really lucky, like the expectation from the start is that it won’t repay and we were lucky that it did. There’s either an awful lot of unforeseen circumstances or people/ companies are taking out these loans with no intention of ever repaying them.

Without reference to Lendy, I feel that some of the loans to smaller borrowers that I have avoided and then seen go into default, have had a common thread. It doesn't involve any duplicity on the part of the borrower however. It appears to stem from the borrower not having the ability to realise the intended value from the loan. A case in point would be one where money has been raised as a second mortgage on the family home. The lenders appear to be happy that the security is sufficient. However I sometimes wonder if the purpose of borrowing and business case behind it is solid enough to have some certainty that it will achieve the intended outcome. Personally I prefer not to invest my money in the pipe dreams or unrealistic expectations of others based on sometimes questionable valuations.




Compounding this is the Exit Strategy. No one with a short term loan will be taking a negative view of the outcome until the worst case scenario becomes inevitable. So at that point, with very little time at hand, negotiating an immediate new loan on what is now a dodgy looking proposition, or putting a house on the market expecting an immediate purchase at the original valuation is just another pipe dream.

The issue to me is that a non-negligible proportion of the borrowers on platforms like SS really have very little downside in taking out these loans. First, you will have people who are fairly desperate. They've tried all the other lenders who offer lower borrowing rates and were rejected. They are going to lose the property if they do nothing. So a P2P lender like SS might be their last hope even at an IRR of 30%+ on a bridge loan. If it works out, they get to keep the property; if it doesn't they lose the property but that was going to happen anyway so the outcome isn't much worse. 

Second, you have property speculators. The set up a SPV ring-fenced from their other businesses and use it to buy a piece of land worth costing say £1mm using conventional finance. They hope to borrow £2mm to pay off the original loan, get planning approval and turn it into commercial/residential units. They can't get finance from a mainstream lender because it's speculative: no planning permission, no pre-let units etc. SS, however, get it valued at say £4mm GDV so will give them a loan of £2.8mm (70% LGDV but 280% LTC). SS and the brokers take of 22% upfront for interest and fees (£616k), leaving £2,184k for the borrower. At this point the developer is in a good position. The've effectively sold the property to the lenders for £2mm+ allowing them to pay the original loan off, have £1mm+ to spend, with no downside equity exposure. If the development goes well, the borrower sells the property for say £4mm and pockets > £1mm. If the development goes pear-shaped, the developer can walk away and has no equity to lose. It's win-win for the borrower, SS and the broker. Somebody must lose but I just can't work out who ...

support.lendy.co.uk/hc/en-us/articles/115005449185-Changes-to-the-Weekly-Update

So the fortnightly update is to become weekly.

"We will be rolling these enhancements out from 18 Feb 2018."

but then later in the same article:

The Round-up will also move to fortnightly to align to the full loan book updates.

Confused? They seem to be....