Necessity to make P2P loans more transparent
Aug 8, 2018 12:05:56 GMT
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easteregg likes this
Post by cwah on Aug 8, 2018 12:05:56 GMT
Hello
I'm writing an here because I feel I've been cheated a few times by mis-understanding the value of a loan from confusing references.
- Misleading LTV description:
Many of lendy DFL loan had crazy low LTV and seemed like a good deal. Sometimes as low as 10%. However, when it went into default, I found out it wasn't 10% LTV but 70% as it was a tranche.
- Speculative LTV using GDV
Many development loans from lendy and others are using GDV to base the LTV. It's extremely unclear and to find that out it needs to go to the valuation report which may not be much clearer.
In an event of default, the construction is incomplete so the LTV is completely wrong. But the LTV is supposed to be used in case of default!!!
- Borrower previous default are hidden
Serial scammers go from platform to platform with impunity.
In the current situation, I think investors are exposed to unacceptable level of risk and are mis-informed on the loan they are putting their money in.
What is happening now is close to this:
Developper make up some random GDV figure and get it approved by the RISC. Then platform will give 120% funding (no money down) to the développer and once money is received, they pretend to work a little but then will do runner after few months.
What we should have is this:
- LTV based on current value for a 180 sale day period.
- information about borrower past default. It doesn't have to disclose personal information, but we need at least to know if he is a higher risk borrower.
- information about the borrower skin in the game. How much is he putting on the table? I'm very worried by the number of 100% loans allowing them to just do a runner with no consequences.
What do you think? Is it something we could raise to the FCA or similar? We need more transparency.
Currently, when things work well, everybody wins... But when it doesn't work, only the investor loose.
I'm writing an here because I feel I've been cheated a few times by mis-understanding the value of a loan from confusing references.
- Misleading LTV description:
Many of lendy DFL loan had crazy low LTV and seemed like a good deal. Sometimes as low as 10%. However, when it went into default, I found out it wasn't 10% LTV but 70% as it was a tranche.
- Speculative LTV using GDV
Many development loans from lendy and others are using GDV to base the LTV. It's extremely unclear and to find that out it needs to go to the valuation report which may not be much clearer.
In an event of default, the construction is incomplete so the LTV is completely wrong. But the LTV is supposed to be used in case of default!!!
- Borrower previous default are hidden
Serial scammers go from platform to platform with impunity.
In the current situation, I think investors are exposed to unacceptable level of risk and are mis-informed on the loan they are putting their money in.
What is happening now is close to this:
Developper make up some random GDV figure and get it approved by the RISC. Then platform will give 120% funding (no money down) to the développer and once money is received, they pretend to work a little but then will do runner after few months.
What we should have is this:
- LTV based on current value for a 180 sale day period.
- information about borrower past default. It doesn't have to disclose personal information, but we need at least to know if he is a higher risk borrower.
- information about the borrower skin in the game. How much is he putting on the table? I'm very worried by the number of 100% loans allowing them to just do a runner with no consequences.
What do you think? Is it something we could raise to the FCA or similar? We need more transparency.
Currently, when things work well, everybody wins... But when it doesn't work, only the investor loose.
