Greenwood2
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Post by Greenwood2 on Dec 22, 2021 17:24:41 GMT
The valuations are based on a sale in market conditions (be it 90 day, 180 day or longer) and is only meaningful in that situation as set out in the RICS rules. It is less meaningful in the distressed sale of a complete property and is largely meaningless for the distressed sale of a incomplete development site where the buyer may have to redo work which isnt guarenteed and will price accordingly (even more so if it doesnt meet fire regulations!) There are two issues 1) Lenders dont understand valuations and the platform does nothing to educate them to allow a proper understanding of the risk. That is a regulatory failure, particularly true in the case of development loans which is why the FCA is looking to tighten regulations on those, even to the extent of banning them to restricted investors 2) Just plain inaccurate valuations for whatever reason. Potentially more telling than the poor realisations is the number of successful PI claims (4 now) Thats firmly in RICS court Do you mean lenders didn't understand that many of the valuations were of zero value ? Do we think professional lenders such as banks make use of such valuations? In other threads it seems lenders didn't understand the difference between loan to current or underlying value (LTV) and what the value would be after 'successful' development (GDV). GDV is difficult to predict and may never happen if the development doesn't complete. The costs of the development may also end up eating up the expected profit and more. LTV is much more certain although values may be exaggerated! Lenders were often presented LTV and GDV values as if they carried the same risk.
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michaelc
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Post by michaelc on Dec 22, 2021 17:36:02 GMT
Do you mean lenders didn't understand that many of the valuations were of zero value ? Do we think professional lenders such as banks make use of such valuations? In other threads it seems lenders didn't understand the difference between loan to current or underlying value (LTV) and what the value would be after 'successful' development (GDV). GDV is difficult to predict and may never happen if the development doesn't complete. The costs of the development may also end up eating up the expected profit and more. LTV is much more certain although values may be exaggerated! Lenders were often presented LTV and GDV values as if they carried the same risk. Yes and there were a lot of bridging loans and loans over completed property whose LTV was several hundred percent off. And virtually _always_ off in the direction to favour borrowers getting a larger loan (unlike the banks who frequently value lower than the agreed price which definitely does not help the borrower).
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Post by df on Dec 22, 2021 18:02:37 GMT
Do you mean lenders didn't understand that many of the valuations were of zero value ? Do we think professional lenders such as banks make use of such valuations? In other threads it seems lenders didn't understand the difference between loan to current or underlying value (LTV) and what the value would be after 'successful' development (GDV). GDV is difficult to predict and may never happen if the development doesn't complete. The costs of the development may also end up eating up the expected profit and more. LTV is much more certain although values may be exaggerated! Lenders were often presented LTV and GDV values as if they carried the same risk. I think displaying GDV as a headline value is very misleading for retail investors. It should be mentioned in VR's, but not put forward as the tool for assessing the risk. It's a pure speculation, but I suspect some valuations could be influenced by the clients' requirements. Too many cases of huge discrepancies across many platforms who use RICS.
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Dec 22, 2021 18:25:49 GMT
The valuations are based on a sale in market conditions (be it 90 day, 180 day or longer) and is only meaningful in that situation as set out in the RICS rules. It is less meaningful in the distressed sale of a complete property and is largely meaningless for the distressed sale of a incomplete development site where the buyer may have to redo work which isnt guarenteed and will price accordingly (even more so if it doesnt meet fire regulations!) There are two issues 1) Lenders dont understand valuations and the platform does nothing to educate them to allow a proper understanding of the risk. That is a regulatory failure, particularly true in the case of development loans which is why the FCA is looking to tighten regulations on those, even to the extent of banning them to restricted investors 2) Just plain inaccurate valuations for whatever reason. Potentially more telling than the poor realisations is the number of successful PI claims (4 now) Thats firmly in RICS court Do you mean lenders didn't understand that many of the valuations were of zero value ? Do we think professional lenders such as banks make use of such valuations? They werent of zero value, they were of zero or limited value in a distressed sale situation because RICS doesnt provide a valuation that is valid in that scenario because it is entirely dependent on the specific circumstances at that specific time that cant be assumed. That is what lenders wouldnt have understood and why would they (I didnt, Ive just done steep learning curve research)? Of course, professional lenders use such valuations, RICS is the global standard but they will be better able to assess risk ... there was a reason these loans were on Lendy ... they were too risky for commercial lenders.
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travolta
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Post by travolta on Dec 22, 2021 18:28:47 GMT
Valuations: They lied or thought of a number and tripled it .
One of the properties down the road from me that had been a problem all my life and suddenly appeared on Lendy's book valued at a ridiculous amount .
I contacted them ,but why should they care ? It was not in their interest .
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Greenwood2
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Post by Greenwood2 on Dec 22, 2021 18:44:43 GMT
In other threads it seems lenders didn't understand the difference between loan to current or underlying value (LTV) and what the value would be after 'successful' development (GDV). GDV is difficult to predict and may never happen if the development doesn't complete. The costs of the development may also end up eating up the expected profit and more. LTV is much more certain although values may be exaggerated! Lenders were often presented LTV and GDV values as if they carried the same risk. Yes and there were a lot of bridging loans and loans over completed property whose LTV was several hundred percent off. And virtually _always_ off in the direction to favour borrowers getting a larger loan (unlike the banks who frequently value lower than the agreed price which definitely does not help the borrower). At least LTV you can check on Zoopla, etc, if it's residential property, if the LTV looks way off you can make your own decision (although many lenders didn't think they needed to). GDV is in the lap of the gods and many lenders didn't realise that.
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michaelc
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Post by michaelc on Dec 22, 2021 19:41:30 GMT
Do you mean lenders didn't understand that many of the valuations were of zero value ? Do we think professional lenders such as banks make use of such valuations? They werent of zero value, they were of zero or limited value in a distressed sale situation because RICS doesnt provide a valuation that is valid in that scenario because it is entirely dependent on the specific circumstances at that specific time that cant be assumed. That is what lenders wouldnt have understood and why would they (I didnt, Ive just done steep learning curve research)? Of course, professional lenders use such valuations, RICS is the global standard but they will be better able to assess risk ... there was a reason these loans were on Lendy ... they were too risky for commercial lenders. No I don't think that is right. They were of zero value to lenders because they were paid for by borrowers (on most platforms) and were given a steer to produce the highest valuation possible. Their value was only to borrowers (and consequently the platform) .
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quidco
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Post by quidco on Dec 23, 2021 8:15:42 GMT
As far as I'm aware on Lendy the amount of a loan was based on the undeveloped current value of the asset with no more than 75% of thst value lent so in theory it's hard to see how suddeny one is getting pennies on the pound from said loans; the lenders only went out of the money if the asset was sold for 74% or less of its current valuation.
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adrianc
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Post by adrianc on Dec 23, 2021 10:45:04 GMT
As far as I'm aware on Lendy the amount of a loan was based on the undeveloped current value of the asset with no more than 75% of thst value lent so in theory it's hard to see how suddeny one is getting pennies on the pound from said loans; the lenders only went out of the money if the asset was sold for 74% or less of its current valuation. No, PBLs were based on the current value - but any DFL was based on the GDV. If you think about, basing any kind of development finance on the current value is just ridiculous, and would never see any project financed. The current value of a muddy hole in the ground is very likely to be miniscule (and, if there's a complex demolition required, might be effectively zero, or even be negative), while the finance required for development is very likely to be MANY times that current value - yet far less than the value of the finished project. Often, the first tranche of a loan included purchase and clearance. Fortunately, Lendy were very clear in providing all the figures and the basis on which they were calculated... Let's look at an example - DFL019. The overview gives a total loan figure of £15m, and states no more than 70% of GDV of the completed phase 1, which it gives as £33m. Now look at the valuation document, written in March 2017. 11.2 gives a current market value for the then-currently operating site with the planning permission (£10m). 11.5 gives residual land values of the southern (£2.4m) and northern (£3.9m) ends of the site, as well as 180 day sale (£2m/£3.3m) and 90 day sale (£1.7m/£2.6m) values. It's not hard to understand what's what, and we all had the opportunity to see that before investing. A godforsaken muddy building site was eventually sold in October 2020 for £1.7m. Unfortunately, that £1.7m sale value was then further hit by the costs of the project's administration and the site's sale, then by the waterfall amount allegedly due to Lendy, so was £550k by the time it was distributed to us with a further £11k retained for potential legal action against personal guarantees and/or professional indemnity. You could argue that the £4.3m 90-day residual value was unrealistically high, but the counter argument is that that fails to take account of the very different economic climate at the time of sale to that prevailing at the time of the valuation. That's where any potential PI claim comes in.
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merlin99
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Post by merlin99 on Dec 23, 2021 10:54:56 GMT
Back in the day, when they first emerged as Saving Stream they were not lending on property but instead boats and cars. I observed one such loan almost first hand as I knew the owner of the boat and he told me he was very happy with both SS and the valuation on his Gin Palace. He only needed the loan for less than a year and had found it very difficult to raise the money from elsewhere. He was not bothered with paying a lot of interest but as SS were the only lenders in the market and it got him out of a difficult financial fix he was very happy.
Clearly in the early days of P2P there where a lot of happy borrowers and lenders getting together to satisfy their financial needs. This was mainly because the banks and other financial institutions were just not happy to lend full stop. The majority of these early loans ran their course and were paid back. A few as one would expect did not, and finished in a rather messy state. I had always assumed there would be losses and from the 12% interest I got from SS, half went into a sort of loss reserve. The net result was overall I got a good return on my investment which was many times more than I would have got from conventional sources at that time.
I should also mention that I had previously invested with Assetz where I had a similar experience but moved to SS when Assetz started to cut the interest rates they were offering. I have incidentally a small number of defunct Assetz loans that I have mentally and practically written off as there is now in my mind and all these years later no chance of a recovery. However I did still do lots better than having my money in a Building Society.
To return to SS/Lendy. My guess is that the two originators got carried way by their initial success and possibly their greed. Thus when lots of new P2P lenders appeared and created competition it then led them into taking on almost any loan no matter how dodgy to fuel their business. It is like acquiring a drug habit which needs to be fuelled by increasing amounts of the drug of choice but in this case it was dodgy loans. There is of course the other matter of money leaving for sunnier climes.
Like my dealings with Assetz I have also written off getting any sensible money back from Lendy or FS now. Fortunately I can well afford these losses but I know a lot of other lenders cannot. They have my sympathy not because as some people say they were stupid but because they were robbed.
Happy Christmas and may we all have a better 2022.
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Post by billy169 on Dec 23, 2021 11:33:29 GMT
So are those PGs worthless ?? They were very important to lending.
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jcb208
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Post by jcb208 on Dec 23, 2021 11:35:49 GMT
Any one know why pbl199 has not been paid out,not had any thing back from my loans since this started
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quidco
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Post by quidco on Dec 23, 2021 11:51:40 GMT
Any one know why pbl199 has not been paid out,not had any thing back from my loans since this started I think the administrators aren't paying anything out at the moment and are sitting on millions pending an agreement on how much they can take from the recoveries for their services
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toffeeboy
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Post by toffeeboy on Dec 23, 2021 12:34:37 GMT
Valuations: They lied or thought of a number and tripled it . One of the properties down the road from me that had been a problem all my life and suddenly appeared on Lendy's book valued at a ridiculous amount . I contacted them ,but why should they care ? It was not in their interest . I think you're wrong with thought of a number, Lendy gave them the number that they needed the valuation to be to reach the required LTV/GDV so they could market the loan. Rather than be independent of everyone the valuers were basically working for Lendy and valuing at the amount Lendy wanted as is being shown now when things are coming up for sale and getting no where near the valuation given. Proving this is a hard thing to do though. Anyone that has bought a house will know that the valuer ask what you the purchasing price is and strangely the value almost always comes back to be what you are paying for it.
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Dec 23, 2021 13:28:01 GMT
Valuations: They lied or thought of a number and tripled it . One of the properties down the road from me that had been a problem all my life and suddenly appeared on Lendy's book valued at a ridiculous amount . I contacted them ,but why should they care ? It was not in their interest . I think you're wrong with thought of a number, Lendy gave them the number that they needed the valuation to be to reach the required LTV/GDV so they could market the loan. Rather than be independent of everyone the valuers were basically working for Lendy and valuing at the amount Lendy wanted as is being shown now when things are coming up for sale and getting no where near the valuation given. Proving this is a hard thing to do though. Anyone that has bought a house will know that the valuer ask what you the purchasing price is and strangely the value almost always comes back to be what you are paying for it. At least one notorious example where that isn't the case. The valuation on the London loan came back light and some of the development loan had to be advanced to make up the shortfall. last
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