Property Loan 20 - Repaid in full after Default

What do people think about a policy that "no interest will be paid unless paid by the borrower. period" as a possibility? You could couple it with a policy which permits trading in loans at a discount at a point (maybe once days become negative so interest is no longer certain?). That said, I think allowing multiple prices on the secondary market becomes messy in an environment where insufficient market actors have the information (and expertise) to accurately price the loans, so there is downside in the approach for sure. But certainly the new policy I propose should put paid to people piling in to defaulted loans trying to get a few days' interest at the expense of Lendy's P&L because they think they'll cover it out of goodwill at the end of the day, and it's a positive policy for prudent investors who would rather see the platform's finances protected than aggressive/ignorant investors "bailed out"...

Haha, how nice it must be to divide investors so cleanly into 'genuinely unfortunate' and 'reckless fools'.

Let me guess, if one of your loans went wrong, you'd define yourself in the 'genuinely unfortunate' category?

The FCA do not appear to like the concept of provision funds and stevefindlay is, I believe, on record here saying that BondMason do not take too much account of them.

Although they do seem to be resiling from a pledge to always restore it to 2% savingstream's PF there was an irrelevence in its old guise as to whether they paid for a default directly or the PF paid in the first instance and then they topped it back up.  This particular loan was complicated by the then extant Terms and Conditions that made Lendy Ltd the principal and therefore arguably liable to the lenders in any event.

Whether you categorise lenders or not it is undoubtedly the case that if someone "invests" in a loan that has defaulted they are taking a greater risk than someone who "invests" in any other loan.  For the record I do not believe either should be compensated by anyone for lost interest.

The problem is that there's no proof that lenders on PBL020 were reckless. Brave maybe, but they could have made an informed judgement that Lendy was willing meet its obligations under this loan and was financially strong enough to do so. The situation was murky enough and communications poor enough that I've been out of that loan for over 11 months, but I'm not going to say that people who decided otherwise were wrong.

The position is different for loans under the new T&Cs, but the existence of the provision fund muddies the waters.

I'm not a great fan of provision funds - on an open market like SS they're a subsidy of risk-taking lenders by risk-averse lenders (if one argues that in the absence of a provision fund rates would be higher), and I'm a risk-averse lender. But on the other hand the provision fund with SS's commitment to replenish it gives SS some skin in the game - prior to the latest change to wording I think it gave an openended commitment to make good losses (but on a discretionary basis).

And yet, those who invested were made whole, both capital and interest. Maybe they got lucky, or maybe they knew something you didn't about the recovery level and Lendys obligations/incentives in this particular case?

In any case, to refer to investors who come to different conclusions to you as 'reckless fools' is the height of arrogance.

No, referring to the people who buy defaulted loan parts and don't pay attention to their portfolio as fools is the height of accuracy.

Lendy said Our auditors have conducted a thorough review of this loan and are satisfied that Lendy Ltd advanced the loan on a sound commercial basis and that our underwriting and due diligence were conducted in a stringent and thorough way.

I emailed to ask what did the auditors have to say about your undisclosed equity holding please? Not yet had a reply