What can be done?

I think that there are just too many players in the property P2P platform market and that a period of consolidation is inevitable.  The only real uncertainty is when.

One can only hope that it is a relatively orderly affair with good platforms taking over poorer platforms.

not sticking up for LENDYS total arrogance and all of the BS they have given us for so long now but i do believe that they will be able to pull through this by learning a very big lesson and realising how quickly the tide can turn on them .if they concentrate now the full force of their team to clean up the backlog of loans and we will have to take losses as and when.i understand that they need to keep new loans coming but some of the latest offerings are absolute insults to us and will only bring more problems in the near future

I admire your optimism rocky1 but the quality of loans has seemed to be in decline for a long while, even before they stopped offering the uniform 12%, and although I must admit I don't follow it closely they seem to be nearly all DFLs, a type of loan singularly unsuited to P2P not just Lendy.

I agree with others on this thread. Nothing I have seen in 20 years of being in fixed income markets would suggest that platform failure would lead to anything other than higher default rates and substantially suppressed recovery values. In that sense, we need to protect the platform' balance sheet which means denying platforms the ability to co-invest alongside lenders (I'm clearly not well since I'm in agreement with the FCA)

The problem here is really the nature of these high risk property loan platforms. They take much of their income upfront and are incentivized to increase origination volumes and damn the quality. The level of experience in credit risk management and recoveries on some platforms is low. Many director's were just brokers in their prior career; the've never had to deal with owning the risk, the fallout from losses or achieving the best recovery. The regulatory framework is too weak. For example the definition of default is far too loose, allowing platforms to "kick the can down the road". Directors could, if they wished, easily extract profits from the platform before the NPL portfolio becomes unsustainable.

My view is that the platform's directors and senior employees need to be aligned with investors' interests without undermining the platform's balance sheet. To me that requires directors to have a substantial amount of their personal wealth at risk in the loan portfolio on a FILO basis (first in, last out) as many private equity and hedge funds require. In addition, as with banks and funds, a proportion of remuneration should be deferred into the loan portfolio for a multi-year period, with claw-back provisions. This is hardly a panacea (employees were major holders of Lehman and Bear Sterns stock and it didn't help) but it might reduce the short-termism and the "pump and dump" tendencies to a degree. At the platform level, you could also explicitly separate the incentive structure into management fees (for providing the intermediation service) and performance fees (which are paid to the platform only when a loan successfully redeems) i.e to reorientate focus from volume to quality. 

Probabilty of any of that happening ... pretty much zero.

Hi  red_panda, any chance you could PM me those EU platforms too, please?

With Lendy now withdrawing the Oxfordshire fields loan, and the latest development tranches being sluggish to fill, it seems that a significant number of investors are voting with their feet. This is perhaps the best action that can be taken. I for one will not invest in Lendy again for the foreseeable future, although like many people here, I am still tied into several defaulted and/or suspended loans, so I can't give them the boot as fast as I would like.

I still feel that valuations are the major problem across the entire P2P sector, and that somehow a way needs to be found to force valuers to give a more realistic figure. Currently it seems that valuations can only be taken as valid for a three month period, and outside that time, it is virtually impossible to take any action against the valuer. This means that valuers can say what they wish, and know they will not be taken to task for it, since any sale of the asset will fall well outside that period.

Perhaps to the required warning "your capital is at risk", should be added the warning "valuations may turn out to be incorrect". This would at least warn new investors not to be as naive as some of us (me included) were, when we took valuations and LTVs to be meaningful indicators of risk.

Bugs4me you're absolutely right that the platforms are at fault too, and that the way they have presented themselves has not been honest.

Another thought that occurs to me about the valuations is that they directly feed into the tardiness in dealing with defaults. If the valuations were good, a defaulted loan could swiftly be dealt with by selling the asset. Since the valuations are way too high, the best course, generally is to try to get the borrower to repay, and to sell the asset as an absolute last resort. This is far from what I envisaged when I started out in P2P. I remember telling my kids that the money was pretty safe because it was all secured on property, at a maximum of 70% loan to value, and that if things went wrong, the property would be sold, and the money returned. That, after all, is what the platforms like Lendy said. The reality has turned out to be very different.