Suggested change to FS loans

It's rubbish that fundingsecure intentionally hides these problems for 6 months, giving us no chance to sell out in the first 5 months, then hold our money hostage for many months/years, has poor recovery and it's our fault

I don't think there are many small investors (ie those investing under £250) take the time to extensively research the loan on offer or they may not have  knowledge of the resources available to perform DD as those investing significantly greater amounts may do.  I think these small investors may totally rely on the valuation that FS provide as being accurate.

It is essential. in my view, to small investors that the valuation provided is within a "ball park" figure.

If the valuation provided by professionals (experts in this field) is excessive and the loans default it surprises me that 12 - 24 months after an initial investment these investors are still prepared to risk their money.

Whilst I acknowledge the value to FS of large investors it seems short sighted of them to totally ignore the small investor.

phil:  AIUI, you will get your capital back before fundingsecure get some of their costs covered -- a portion of FS fees are paid at the time a loan is made.

So while FS do have something to lose when loans turn bad, they don't give up everything they would have received from that loan.

If anyone knows otherwise, do please set the record straight.

Having said that, though, IMHO the greatest incentive FS have to recover every overdue loan is the damage bad loans cause to their track record.  Which, of course, explains why they do everything they can to avoid declaring a loan to be a loss for as long as they possibly can -- or perhaps even longer than that.

Might you be interested in buying this lovely parrot? 

Mike, how do you know that is true? fundingsecure could still be taking their cut first. We have not seen any paper work about this.

I read it as FS take their 5% before anything else, I don't see why else it would be mentioned before the list of how funds are dispersed, the list also containing a catch all at the bottom for other FS fees.

I understand this position, and it may well be correct.  But I read 6.2.4 as saying FS charge an extra fee if they have to dispose of the property -- as opposed to the borrower repaying -- and I thought that its place in the repayment order was covered by 6.2.5 (4).  The costs noted in 6.2.5 (2) are FS's out of pocket costs, so those rank ahead of investor interest.

The bottom line is that FS are the only people who know how things actually work, and they've not made it perfectly clear, as evidenced by the differing interpretations here.  This is the sort of issue that keeps the money rolling in for the lawyers.

Having said all that, though, consider the recent update for Loan 1922610905...
I wasn't in this loan, but IIRC it has been reported here that investors actually have received 87% of their capital back.  Since the loan was for £250k, that would be consistent, allowing for rounding, with the £216.44k mentioned in the update.

The important point here is that Clause 6.2.4 says FS are entitled to 5% of the net proceeds.  5% of £225k is £11.25k.  If that ranked ahead of investor capital in the payout queue, there wouldn't have been as much as £216.44k to distribute to investors from a £225k sale.

One possible interpretation of that result is that the clause 6.2.4 fee doesn't outrank investor capital.  However, that isn't the only possibility.  FS could have decided to waive that fee so as to reduce their investors' losses.  That wouldn't be unprecedented, since they've done that in the past.  Or perhaps the £225k sale price reported already had the clause 6.2.4 fee taken off.

Have FS provided investors with a detailed statement of the disposition of the sale proceeds?  If not, why not?  Do investors not have a right to be given that info?

In short, we really don't know exactly what's going on, and that won't change unless FS are willing to be a bit more open with us.

How about it, fundingsecure?