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Post by valueinvestor123 on Feb 9, 2021 17:09:47 GMT
Probably has been discussed ad nauseam...but is there a reason why all of the loans were so grossly over-valued? Do the valuers not bear any responsibility in this? (do they have insurance?)
I realise a lot of DFL loans were valued at their prospective/finished prices but they also had other loans/properties that were all grossly overvalued.
It seems there was basically zero safety margin with the securities (completely not what was advertised or explained) - if the securities had been valued more realistically, then investors could at least get some of their monies back but there seems to have been fraud committed on several levels. Regardless, surely organisations that valued should explain themselves. (Have they?)
Also what does FCA say about this? Lendy is not the only platform where this happened (fundingsecure seems similar).
Apologies, I haven't read all the threads.
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Post by valueinvestor123 on Feb 9, 2021 17:26:28 GMT
Regarding this bit: "Before the platform went into administration, Lendy made a “dramatic change to the terms and conditions” regarding the way that people would get paid in the event of a wind down, according to Taylor. “Aside from the fact that Lendy should not have been able to change the rules retrospectively – the net effect was that Lendy’s closure put into effect a waterfall that would strip as much as half of all the anticipated cash recovered before it got to investors,” she said." www.p2pfinancenews.co.uk/2020/09/17/fca-under-fire-as-investors-gather-new-evidence-of-lendy-fraud/Are the monies being put into some segregated account until the court case is over? Even if it is ruled in investors' favour, there may be nothing left as Lendy might send it offshore before the ruling. (I understand the process hasn't even began yet). |
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Post by valueinvestor123 on Feb 9, 2021 17:37:23 GMT
Answering myself... I think I found the relevant info: "Lendy loans overvalued Speaking at the NARA property receivers conference last month, RSM Restructuring Advisory partner Damian Webb who is overseeing the recovery of as much capital as possible for investors, said one of the biggest issues at Lendy was the accuracy of valuations. He confirmed that only around 30 per cent of the original values are being collected on average against outstanding loans. Speaking about wider issues with valuations within the peer-to-peer sector, and not specifically those at Lendy, Webb noted a lack of processes where borrowers were allowed to appoint their own valuer. “The borrower would then say the value needs to be ‘X’ and the valuer would sign off on it and you would consistently see valuers working on a range of projects for the same lender,” Webb said. “The P2P lenders would also lean on the valuers as they wanted to deploy the capital, so it wasn’t just the borrowers. “So they would encourage the valuation level and would ignore things such as connected party leases, they wouldn’t read the title documentation properly, they wouldn’t engage properly.”" www.mortgagesolutions.co.uk/specialist-lending/2020/12/22/lendy-valuer-settles-625k-pii-claim-for-2m-over-valuation-as-company-boat-sold/If this was indeed the case, why can't the valuers be held accountable for shoddy practice? Who regulates/overseas them? Consistent overvaluation by huge amounts is surely enough for them to be held liable? |
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adrianc
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Post by adrianc on Feb 9, 2021 17:38:32 GMT
Probably has been discussed ad nauseam...but is there a reason why all of the loans were so grossly over-valued? Do the valuers not bear any responsibility in this? (do they have insurance?) I realise a lot of DFL loans were valued at their prospective/finished prices but they also had other loans/properties that were all grossly overvalued. It seems there was basically zero safety margin with the securities (completely not what was advertised or explained) - if the securities had been valued more realistically, then investors could at least get some of their monies back but there seems to have been fraud committed on several levels. Regardless, surely organisations that valued should explain themselves. (Have they?) Also what does FCA say about this? Lendy is not the only platform where this happened (fundingsecure seems similar). Apologies, I haven't read all the threads. Reading the threads and the valdocs is probably the place to start. Let's take DFL019 as an example... Market value given in the valuation is £10.1m. That was for a functioning and trading exhibition venue in 2017, with PP granted in 2015 for 144 holiday accommdation units as an amendment to a 2013 development plan. Comparables had 90%+ occupancy. Residual land value was given as ~£6.4m. Anything above that was GDV, sold as a shiny turn-key finished development that simply never happened. By October 2018, £15m had been drawn down, and the site updates were reporting cash flow issues. It was clear nobody on Ly wanted to hand them more money, and the updates point towards third-party funding being needed. By November 2018, it was looking like any funding would require a first charge, ahead of us... By February 2019, Ly were looking for investors for build-out. By October 2019, Ly were looking to sell as-is. So, 18 months later, they've just achieved a sale - £1.7m+vat for... what? Have you seen the April 2019 photos? It's a muddy mess full of half-finished garden sheds, with planning permission that may have expired, and which may not suit the new owner... always assuming two years of North Yorkshire weather hasn't trashed them. In the middle of a pandemic that's taken a year or two out of the entire tourist industry... If the valuation is demonstrably wrong, then there's a PI claim. But valuations are covered in caveats.
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iRobot
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Post by iRobot on Feb 9, 2021 17:43:17 GMT
a) Probably has been discussed ad nauseam... b) but is there a reason why all of the loans were so grossly over-valued? c) Do the valuers not bear any responsibility in this? d) (do they have insurance?) a) It has, but no problem  b) I'll let ozboy wade in on that one!   c) Broadly speaking: No* d) Broadly speaking: Yes; but see c) * individual loans / loan types will have varying reasons why I've answered 'No' to c) In a strange irony, Lendy (or rather their administrators) are one of the few platforms I know of that has successfully claimed against a valuer's PII; see Lendy valuer settles £625k PII claim. IIRC that was for a reasonably straight forward residential property, rather than a development plot with (or without) Planning Permission and a helluva lot of hope value.
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Post by valueinvestor123 on Feb 9, 2021 17:45:49 GMT
Probably has been discussed ad nauseam...but is there a reason why all of the loans were so grossly over-valued? Do the valuers not bear any responsibility in this? (do they have insurance?) I realise a lot of DFL loans were valued at their prospective/finished prices but they also had other loans/properties that were all grossly overvalued. It seems there was basically zero safety margin with the securities (completely not what was advertised or explained) - if the securities had been valued more realistically, then investors could at least get some of their monies back but there seems to have been fraud committed on several levels. Regardless, surely organisations that valued should explain themselves. (Have they?) Also what does FCA say about this? Lendy is not the only platform where this happened (fundingsecure seems similar). Apologies, I haven't read all the threads. Reading the threads and the valdocs is probably the place to start. Let's take DFL019 as an example... Market value given in the valuation is £10.1m. That was for a functioning and trading exhibition venue in 2017, with PP granted in 2015 for 144 holiday accommdation units as an amendment to a 2013 development plan. Comparables had 90%+ occupancy. Residual land value was given as ~£6.4m. Anything above that was GDV, sold as a shiny turn-key finished development that simply never happened. By October 2018, £15m had been drawn down, and the site updates were reporting cash flow issues. It was clear nobody on Ly wanted to hand them more money, and the updates point towards third-party funding being needed. By November 2018, it was looking like any funding would require a first charge, ahead of us... By February 2019, Ly were looking for investors for build-out. By October 2019, Ly were looking to sell as-is. So, 18 months later, they've just achieved a sale - £1.7m+vat for... what? Have you seen the April 2019 photos? It's a muddy mess full of half-finished garden sheds, with planning permission that may have expired, and which may not suit the new owner... always assuming two years of North Yorkshire weather hasn't trashed them. In the middle of a pandemic that's taken a year or two out of the entire tourist industry... If the valuation is demonstrably wrong, then there's a PI claim. But valuations are covered in caveats. Thanks, I have seen the photos and drone videos of the Great Mud Project... However, how can land be overvalued by so much? Surely there should not be any doubt how much land is worth? Is this not something the valuer should be charged with? Trouble is, if there are no consequences and repercussions, then it's just going to keep happening. This was marketed as a consumer product (albeit risky), surely one thing where there should be no discrepancies (up to a point) is when an independent valuer is involved, valuing land?
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adrianc
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Post by adrianc on Feb 9, 2021 18:01:17 GMT
However, how can land be overvalued by so much? Surely there should not be any doubt how much land is worth? What's it worth? It's worth what somebody's willing to pay for it. The valuer was merely giving their opinion of what somebody might be willing to pay. They weren't waving their chequebook at it. Sure, it was a considered professional opinion... But it's still ultimately a guess. And - worse than that - it was a guess based on market conditions that simply don't apply any more because we've had a situation in the last year that nobody could reasonably have foreseen four years ago when it first turned from PBL035 into DFL019... I can already hear several of the other posters gnashing their teeth at that... But remember that this sea of mud was for sale for several months before anybody had ever heard of Covid... Nobody gave a toss for it then, either. Ultimately, it was a development project. A fairly big one. Development projects need a lot of cash flowing in, because anybody who's ever hired a builder for anything know builders like to spend a lot of money quite quickly. And, until the builder finishes, you're left with a sea of muddy bricks and timber, not a nice comfy warm holiday park with cash flowing in... What actually went wrong with DFL019? <shrug> Probably a stack of little things. Probably any of a dozen things that, taken in isolation, would have been survivable but stuck together were just too much. Then consider that one of the drivers for it going pear-shaped was very likely to be that WE weren't chucking enough cash at the builders... Yes, it probably was always too big for Ly to fund - but remember that this was about the time that P2P turned from being unable to source enough loans to absorb the cash being thrown at it, to "Ooh, blimey, Collateral just went pop". Nothing focussed Joe Public's attention like a platform shutting the doors with an unmistakable aroma coming round them... Yes, continuing funding the development might very well have been an open-ended pit. Yes, it might very well have been good money after bid. But when those cash-taps closed, the actual lads downed tools and went home, leaving a sea of mud and some half-assembled garden sheds. Two years ago.
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Post by billy169 on Feb 9, 2021 18:09:41 GMT
Where did the money go?,,not on the land or sheds.
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Post by valueinvestor123 on Feb 9, 2021 18:26:41 GMT
However, how can land be overvalued by so much? Surely there should not be any doubt how much land is worth? What's it worth? It's worth what somebody's willing to pay for it. I am not sure this is quite fair. Valuers have a responsibility to value things according to what it is worth. One-off over-valuation could be understandable but across the board: it has to be looked at. From articles it seems that they were in on it. If that is the case, then surely they can be held accountable for the significant shortfalls. Or at least pay penalties for mis-conduct.
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TitoPuente
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Post by TitoPuente on Feb 9, 2021 20:32:08 GMT
I cannot wait for ozboy to chip in! My personal opinion is that RICS is an extremely corrupt organisation that needs to disappear and be replaced with something else. |
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ozboy
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Post by ozboy on Feb 9, 2021 22:11:39 GMT
Ha Ha, it's all been said before. Mostly by me, as you lot often point out! Three Points. 1/ Yes, some "Professional" "Valuers" were obviously "in on it", or, at the very least, "open to persuasion." 2/ Being a RICS Member is as solid, reputable & reliable as ....................... a Platform being FCA Authorised and Regulated. 2/ Some Valuers must be prosecuted and jailed. |
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ozboy
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Post by ozboy on Feb 9, 2021 22:42:26 GMT
Valuers are definitely culpable adrianc, they have NO excuses. Whatsoever, NONE. ZERO. I know nothing about Property Development, however, with my trusty calculator, I quickly learned to do very basic, quick & amateur schoolboy reckoning on each Loan, which invariably resulted in a "No way, that Valuation's SO inaccurate, it doesn't stack up anywhere near. At all."Now, if I can Value a Loan/Asset, as an Idiot, FAR more accurately than a "Professional Valuer", with Accreditation, and with YEARS of experience, well, then, errrrrrr, summit's not quite right? Is it? |
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Post by df on Feb 9, 2021 23:00:27 GMT
I cannot wait for ozboy to chip in! My personal opinion is that RICS is an extremely corrupt organisation that needs to disappear and be replaced with something else. Certainly one of those misleading qualifications. I agree, this valuation business should be regulated properly.
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ilmoro
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Post by ilmoro on Feb 9, 2021 23:15:46 GMT
Seems to me the valuer got it spot on
"Any relationship between the price achievable by a forced sale and the market value is coincidental"
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adrianc
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Post by adrianc on Feb 10, 2021 9:08:59 GMT
What's it worth? It's worth what somebody's willing to pay for it. I am not sure this is quite fair. Valuers have a responsibility to value things according to what it is worth. That seems a bit... circular. The very definition of what something is worth is the price point which a motivated seller is willing to accept and a motivated buyer is willing to pay. People can often take a good stab at what that is via comparables. GDV is relatively easy - you come up with comparables for the finished units, and multiply those by the number of units. Build cost is known. Subtract build cost from the GDV, along with an element of contingency and profit, and that's the price point at which the plot becomes a viable project...
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