Property Loan 20 - Repaid in full after Default

I am not saying any solution is perfect, but the problem with this analysis is that it assumes the PF can be topped up (assumes new loan origination continues at a pace sufficient for top-up amounts to exceed paid-out amounts), is in fact topped up (assumes Lendy elects to do so - to my knowledge they have no obligation to do so, or even to send "at least X%" of fees received for new loans to the PF, so they could reduce X in particular where they want to make themselves whole for having paid interest from their P&L as it seems they have on PBL 20) AND that the PF steps up on every loan where there is a shortfall on a sale of the collateral (again, not guaranteed). 

At the end of the day probably no one is more deserving than others to be saved by either the PF or Lendy's P&L. I think I am in the camp that there should be no bail outs by either: lenders should just wear their own losses, and then lenders whose loans don't default are not ultimately punished by the increased risk of platform failure caused by loans in which they elected not to invest, but those who wish to take the extra risk are obviously free to do so.

I will only agree to the removal of the PF if the 2% of the PF is added to our interest. This will not be a straight 2% increase but somehow evened out over a typical length of a loan. Someone with maths skills can tell us how this can work.

The PF is not part of the terms and conditions and is discretionary anyway, SS don't need your agreement to anything.  You might if you are lucky, get an email from senior management to say if you don't like it you can go elsewhere, as another forum member did only yesterday.

You will have to complian to the Portmouth Trading Standars Office then, I doubt you will get very far, the FCA won't be interested as I suspect that SS will be withdrawing soon it to help with authorisation.

To all those lenders concerned about use of the Provision Fund.


Obviously, PBL020 has depleted the provision fund but we should not assume all loans in default will have the same problem. Currently, the 3 loans in default could reasonably be expected to recover all capital and interest. In addition to that, these loans continue to accrue interest over and above that which SS originally expected. If we assume the borrower pays an interest rate of 18%, then SS have accrued an additional 6%, which amounts to c.£200k for these 3 loans to date. There is a reasonable chance that this will all get recovered and replenish the Provision Fund. It is also possible that SS impose a default rate of say 3%.


Overall, if the average loan defaults for 18months with an LTV of 70% that is accurate, then the PF would be a winner every time.
In fact, you could say defaults are good if the valuations are accurate.

Fees are one way in which the PF can be funded, they are not necessarily its exclusive source of funds. It stands to reason that if Lendy makes more money, covering any losses it suffered for example in bailing out PBL 20 interest, it might send some of that extra profit to replenish the PF, either directly or indirectly (e.g. by contributing a greater proportion of fees on new loans to the PF).


That said, if Lendy is making extra money off loans which go into default (e.g. through default interest), I would definitely argue that at least a portion of this should be passed on to investors (fine for Lendy to cover their costs of enforcement and to make a margin, but they already make an incremental 6% interest plus whatever fees they do not put into the PF, out of which I would hope they could pay for (at least the majority of) these expenses!).

I suggest you go and read SS' own interpretation of how they want to do things.