Property development lending

But it's not the borrower paying anything.  It's just the platform borrowing more money from lenders to pay back to lenders during the term of the loan (and calling this 'interest').  Developments don't produce any income until they are sold.

Personally if a development is going to cost £100k I would rather the developer borrowed £100k rather than £120k so they could pay me back my own money every month under the guise of 'interest'.

Borrowers should have to get the valuation done by an individual from an approved list provided by the platform, who is able to be struck off the list if there valuation is way out in the event of a default.Also the inherent risk of fire sell discount taken into account in their judgements as part of the contract to which they oppereate to. Lenders need to have more influence in process.

do we need a poll first?

think the borrowers ability to do the project is important and should be considered more by platforms sometimes.Have they done this size of project before or is it a step up or even the first time as it would be nice not to find out if the VR,personal guarantee's, LTV etc are right.Would guess sometimes(but hopefully not)that companies are aware of borrowers shopping around and are keen to get the business and like estate agents aim to please with their figures

Trivial as it may seem, this is something I use to triage offers - if you can't be bothered to prove reed and rum spill chequer then I can't be bothered to loan you my money. Next ...

After a few months concentrating on other things, I've spent the last few weeks on fairly intensive due diligence on loans on COL/FS/L/MT, and to be frank I'm pretty disillusioned with what I'm discovering (all of the above !!) . Is there a gap in the market for an ethical p2p platform ? Or is 101 ways to serve up deceit the only viable business plan ? At present I'm seeing little to choose between COL/FS/L/MT in terms of appalling ethical behaviour (and I suspect ABL is no better, but I'm not a lender there). Would platforms really struggle to attract borrowers if they were 100% open and truthful ?

I am absolutely fuming that after spending hours working out my own LTV for the MT Birkenhead loan, I now discover that for whatever reason I wasn't told of the existence of what probably (subject to further legal guidance) amounts to prior charges ahead of the MT charge, or the end borrower was in technical default at the time of the listings for the later tranches. I have a chunk of the MT Lancs Residential Park despite some misgivings over the real LTV (but some posts on the forum did reassure me that I was probably being slightly over pessimistic). I now discover that MT don't routinely declare missed / very late payments by borrowers so I have no idea whether the borrower is up to date with the repayments and whether there have been any serious delays with any of the repayments so far. Given I'm uneasy with the LTV, I may have to sell this loan as I have no means of assessing payment performance, and hence current risk of default.

For lenders such as me to do adequate due diligence on loans on COL/FS/L/MT to come up with an independent risk assessment is tough, and sometimes can only be completed when the loan has drawn down due to the deliberate attempts by platforms to disguise the identity of both assets and borrowers. The COL Darwen/Burnley loans are a case in point. The platform implies that there are two principals of the borrowing company one very experienced, when google tells us that it is one principal with minimal experience of property development.

I assume most people are aware that for secured loans to UK companies, a simple google search

    {platform name - of the security trustee} charge site:companieshouse.gov.uk

reveals details of both assets and borrowers ? Throw a bit of an address into the search

    {platform name - of the security trustee} charge {asset's town} site:companieshouse.gov.uk

and it pretty much throws out the answer. Trivial. What does redacting details of borrowers and their assets really achieve ?  Far less trivial, I'm about to write a crawler/spider application integrating with the companies house web API to extract details of the other business interests of the directors of borrowing companies. There are a lot of shady characters borrowing on p2p platforms, and unless the security is rock solid an assessment of the borrower's business ethics is an essential risk factor.

EDIT: Its worth noting some assets are "hidden" in overseas companies (e.g. the COL Bolton and MT Paisley assets are charged to Gibraltar companies) which makes lender due dilligence, and on going monitoring of the borrowing company prohibitively expensive.

registerme has already mentioned valuation reports that are simply fanciful (e.g. FS Wimbledon Construction) or contain basic blindingly obvious errors (e.g. MT Putney), and the lack of sight of MS reports by lenders prior to tranche drawdown (e.g. almost all FS/L loans). The FS Whitehaven loan is a frightening example of what can go wrong when there is no MS involvement at all.

Which brings me back to my opening question: Is there a gap in the market for an ethical p2p platform focussing on the property development sector ? (and could/should any of ABL/COL/FS/L/MT aspire to be that platform? ) Actually AC in my opinion is pretty much there these days (totally anonymous loans are long gone), but I'm not sure ABL/COL/FS/L/MT would necessarily regard AC as a close competitor (for borrowers).

What do I mean by ethical ? As an overriding principle, I think it is about being 100% open and honest, revealing all risk factors however minor, revealing borrowers payment performance, revealing who the borrowers are, what the asset is (no redacting), ensuring the valuation report considers worst case fire sale realisation, providing copies of the land registry documentation after the charge has been filed to save dozens of us each having to pay £3 (or £6 or £9 if multiple titles) to download them (now a necessity given the MT UN1 issue). Perhaps we are all naive, and playing dirty is actually the only game in town. I called time on my own career partly through the realisation that my own ethical approach of 100% open and honest communication was rarely appreciated. I confess I have a mental block here.

I genuinely believe that the current lack of openness and honesty at COL/FS/L/MT is going to force the FCA eventually to take some action. I've been lobbying hard for individual loan selection to be banned from retail offerings (i.e. restricted to sophisticated/HNWI). For high volume platforms (FC as the prime example) operating a black box account for retail lenders is workable, and it would probably work at FS. But I'm not convinced ABL/COL/L/MT have the volume of loans to make a black box account feasible. In other words I fear the current lack of openness and honesty with lenders by COL/FS/L/MT could in due course cause an existential crisis for one or more of these platforms.

The expectations of the average forumite regarding business ethics is, I suspect, WAY above what is the norm in UK business, and given that many p2p borrowers (the platform's actual customers) are sub-prime operating on the boundaries of legality never mind ethics and morality it is hard (perhaps impossible ?) for p2p platforms to live up to the expectations of forumites. Cue withdrawal of platform reps from active participation on the forum as the discussion is on a different plane to that on which the platform is actually operating. A platform rep simply can't square the circle between how lenders expect the platform to operate, and how the platform has to operate in the shady world of sub-prime loans. The result is viscous circle of forumites getting ever more disgruntled, and pushing platform reps further into their shells. Which, intuitively, isn't conducive to good due diligence, by platforms or lenders.

This year seems to have reached the point of five similar platforms (ABL/COL/FS/L/MT), all offering similar loans, all believing openness with lenders will kill the business. Is that the pinnacle of the dream of the founders of these platforms ? Eleven years on from zopa's launch, I am so disillusioned with where we have ended up. The original p2p concept of a borrower making a pitch for funds from a pool of lenders seems to be fading fast. But is the demise of that original concept inevitable ? There are a few borrowers with a good demonstrable track record in their field. Why not present a professional portfolio of the borrower's work to support his loans, and yes, be open, and explain the background to any liquidated companies he is associated with. And perhaps, just perhaps, when one of his projects slips behind schedule slightly, there might be a bit less alarm from lenders.

Good post by mrclondon above, and I agree with most of it. The only point I would query is the opinion that AC are the most transparent. They are unwilling (and I think are actually unable) to say which lenders in the QAA would take the hit in the event of a default which could not be covered by them.