arby
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Post by arby on Aug 10, 2019 7:32:56 GMT
We all knew that fraud was possible. What was completely impossible to know from the outset, and is still a little uncertain a few years later, is whether the number of borrowers willing to act in such a manner is <5% (= sustainable as losses covered by returns on other investments) or > 10% (= unsustainable).
As time goes on, the likelihood of it being at or above 10% seems uncomfortably large.
(obviously these numbers are arbitrarily rounded, rather than 10% being some exact magic threshold).
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hazellend
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Post by hazellend on Aug 10, 2019 7:41:31 GMT
We all knew that fraud was possible. What was completely impossible to know from the outset, and is still a little uncertain a few years later, is whether the number of borrowers willing to act in such a manner is <5% (= sustainable as losses covered by returns on other investments) or > 10% (= unsustainable). As time goes on, the likelihood of it being at or above 10% seems uncomfortably large. (obviously these numbers are arbitrarily rounded, rather than 10% being some exact magic threshold). I think the more unpredictable disaster was the amount of fraudulent platforms like Lendy and collateral
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hazellend
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Post by hazellend on Aug 10, 2019 7:42:29 GMT
We all knew that fraud was possible. What was completely impossible to know from the outset, and is still a little uncertain a few years later, is whether the number of borrowers willing to act in such a manner is <5% (= sustainable as losses covered by returns on other investments) or > 10% (= unsustainable). As time goes on, the likelihood of it being at or above 10% seems uncomfortably large. (obviously these numbers are arbitrarily rounded, rather than 10% being some exact magic threshold). I think the more unpredictable disaster was the amount of fraudulent platforms like Lendy and collateral
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agent69
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Post by agent69 on Aug 10, 2019 8:09:59 GMT
One of the former directors is currently unwell and cannot talk to anyone.
All sounds a bit familiar. I guess he'll be off to Spain shortly to recouperate
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bugs4me
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Post by bugs4me on Aug 10, 2019 8:26:46 GMT
I think the more unpredictable disaster was the amount of fraudulent platforms like Lendy and collateral Couldn’t agree more with you but the reality is that the quality of management running the platforms leaves a great deal to be desired. I was one that posted somewhere that I rued the day the FCA became involved especially with their ‘light touch’ approach towards the P2P industry. In my experience, having dealt with their predecessor the old FSA, a ‘light touch’ translates into a ‘we don’t know what we are meant to be regulating’. Nonetheless there was a mad scramble by all the platforms to use the FCA to cloak themselves in an air of respectability. Basic platform DD - well I wouldn’t have lent some of the individuals my copy of the daily newspaper let alone trust them with my hard earned cash. Nonetheless, growth was the name of the game for the platforms hoping to attract at some stage institutional funds. The problem with their growth plans was and in many cases still is, to accept business at any cost putting forward the best case scenario as to why folks should lend/invest and conveniently omit material facts. Just refer to DD Central to view the hidden ‘gems’ that have been uncovered regarding borrowers. Are we really expected to believe that the platforms were not aware of these. If they were aware but chose not to disclose then they are guilty of deception to say the least. If they were not aware, then they are guilty incompetence. So I ask myself why would I lend/invest with these platforms. Okay, the savings rates from traditional high street institutions are derisory but at least I know I’ll get my money back with a few extra pennies thrown in rather than being involved in the P2P wild west with their infantile attitude towards lenders - can kicking, deliberately delayed defaults, so called provision funds, ‘incestuous lending practices - the list is endless. Many borrowers, existing and potential are aware of platform weaknesses. That weakness is an urgency to grow the platform and/or weak management. And those borrowers are far more experienced in the business world at extracting funds than the platforms are at managing them. Of course the problem is amplified insofar that the platforms are not using their own funds. My decision to exit P2P, where possible, made last year was the correct one. If there are zero further repayments from my defaulted loans then my IRR will be in the 4% bracket. Simply not worth it. Maybe one day I’ll actively return but until there is a platform that treats lender’s funds as though it was their own money then I expect any return to be later rather than sooner.
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invester
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Post by invester on Aug 10, 2019 8:57:45 GMT
Would there be anything to stop the pawn loans going the same way?
Last physical audit was a few months ago now.... if the business ends up in distress it seems all too easy to just rip off lenders before going bust.
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bramhall17
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Post by bramhall17 on Aug 10, 2019 9:04:23 GMT
I have slashed my discretionary involvement in anything property related. I say 'discretionary', I'm now stuck with Lendy but a few thousand nett of lifetime Lendy/SS interest. I'm hopeful that MT, who I think are decent people ,do finally get those property projects paid back ---though the 'Things' are sadly starting to resemble 'Bambi on Ice' in what progressively appears to be a world of wolves,sharks and canny hard nosed operators. I've got my B2B loans in FC down to below lifetime nett interest. I've moderately scaled back my comsumer credit P2P sector loans ( RS,LW, Z) but objectively this sector is still performing reasonably well for me. So I'm not if the P2P equivalent of the 'retreat from Moscow'...................
I want to highlight something that MrcLondon said that really struck me as quite profound :---
" Most p2p lenders are ordinary people who have worked hard to earn the money that has been thrown away by investing in any manner of dodgy loans promoted by multiple p2p platforms, in part because borrowers have to be treated "fairly".
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Post by spareapennyor2 on Aug 10, 2019 9:24:01 GMT
One of the former directors is currently unwell and cannot talk to anyone.
All sounds a bit familiar. I guess he'll be off to Spain shortly to recouperate
it`s the other missing director that`s the problem
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r00lish67
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Post by r00lish67 on Aug 10, 2019 9:41:24 GMT
I never particularly decided "no more self select P2P" as a rule, but just by my comfort level being continually eroded in the face of evidence, I've reached the point where I now have zero in it (aside from defaults of course).
If it moves, it can be removed. If it's being built, it's currently worth very little. If it's already built, you can bet your bottom dollar it's drastically overvalued. All P2P borrowers are sub-prime. Most are willing to bend the rules, a significant minority are content to break them. Bending and especially breaking the rules results in a bill that almost always falls at the feet of investors. Platforms incentives are not aligned to investors interests. This results in carelessness with our money - "Did we say Freehold? we definitely meant Leasehold", "Uh oh spaghetti-o's! Looks like we forgot to register our first charge again - soz!" The regulator in this arena seems rather more focused on covering its own arse from it's negligence as opposed to protecting investors.
Put all of this together, and I just don't find any self-select P2P option attractive. The only consistent short term profit to be made in this space was from each other. Not quite what P2P is meant to mean.
My eyes are now turned thoroughly towards black-box, and I don't mean I'm piling my money in there (although I do invest). I mean I'm far from sure that's going to continue working for investors as well.
Edit: Oh, I can say 'arse' without it turning into a little red face. Well, every cloud...
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Post by mrclondon on Aug 10, 2019 11:36:55 GMT
The problem with their growth plans was and in many cases still is, to accept business at any cost putting forward the best case scenario as to why folks should lend/invest and conveniently omit material facts. Just refer to DD Central to view the hidden ‘gems’ that have been uncovered regarding borrowers. Are we really expected to believe that the platforms were not aware of these. If they were aware but chose not to disclose then they are guilty of deception to say the least. If they were not aware, then they are guilty incompetence. But if they are aware, to disclose would break the rule "borrowers must be treated fairly" if that disclosure was for example to advise lenders that a borrower has falsified CH records, had an unspent criminal conviction, or was widely accused of fraud on the internet (as applies to 3 different MT borrowers, 2 of the 3 are in default. For clarity I am not referring to RCC here).
I suspect in many cases the lawyers handling the drawdowns are not being diligent in reporting back to the platforms issues of concern, and may not understand the implications for recoveries at the high LTV's we usually face of even minor discrepancies in the detail. The Lytham St Annes freehold/leasehold should have been picked up at the time of drawdown, either by the laywers or by MT reviewing the legal paperwork themselves.
I've recently discovered another not disimiliar case ... the VR for the London flat in the "spikey animal" loan claims that the property has a share of the freehold, and that it is a purpose built apartment. Neither is true, the LR records confirm the freehold is in separate ownership, and that the apartment is a converted office (it took a planning appeal for the retrospective application for the change to residential use to be approved). Where did that false information come from ? I assume from the borrower. But MT did not subsequently require a "side letter" from the valuer to confirm (or not) that the valuation was unaffected by these false statements. (Without such a letter no future claim against the suveyors' indemity insurance is going to succeed, if the subsequent legal drawdown processes failed to result in a challenge to the obviously incorrect info)
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Post by SophieThing on Aug 12, 2019 13:07:03 GMT
mrclondon, Not aware any borrower has falsified CH records- please message me if you believe this to be the case and on what basis and we will of course look into it. Borrower backgrounds- You are right, we do sometimes have to make judgement calls on fairness to borrowers/ lenders. The internet is full of accusations- just look at this forum- it doesn’t mean it is true. MT can’t print accusations or we place the platform at risk of litigation. However, we take reasonable steps to ascertain the good standing of a borrower. This includes looking at a number of sources including social media and online checks. We also ask the borrowers to account for any information found. We can’t of course, make guarantees and background checks won’t pick up on some things, and can’t take into account how someone will behave when things go wrong for them. We will be including more information about the borrower, key people and background in our new loans going forward. Lytham- Yes this should have been picked up at the time and we have since reviewed our processes in regard to checking valuations. The freehold/leasehold issue did not impact the eventual outcome for lenders as reported on the platform. Spikey Animal loan- information came from the valuer. The Certificate on Title checks were all fed back to the valuer, who chose not to amend his report. It doesn’t affect the valuation or our ability to claim. Kind regards Sophie
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bramhall17
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Post by bramhall17 on Aug 12, 2019 13:56:21 GMT
Candid comment quite refreshing --- good on you. Prehaps you could enlighten us on how a car can be pledged as an asset to different finance companies ? Not a trick question honest! Is there not some over-arching official asset register that financial firms have access to that stops this happening ?
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Post by mrclondon on Aug 12, 2019 14:16:26 GMT
mrclondon , Not aware any borrower has falsified CH records- please message me if you believe this to be the case and on what basis and we will of course look into it. Done.
However beyond that specific example I had in mind when I wrote my post, mis-spelling names and dob on CH records to hide previous business failures is far from rare.
I would also contend that filing false accounts (e.g. dormant company accounts for periods including outstanding loans) at CH is also falsifying CH records. (Not sure if this actually applies to any MT loans, but does to a significant number of p2p loans more generally).
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bugs4me
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Post by bugs4me on Aug 12, 2019 15:24:22 GMT
'....Borrower backgrounds- You are right, we do sometimes have to make judgement calls on fairness to borrowers/ lenders. The internet is full of accusations- just look at this forum- it doesn’t mean it is true. MT can’t print accusations or we place the platform at risk of litigation....' Kind regards Sophie SophieThing - thank you for responding to the post by mrclondon . I do not believe any potential lender/investor is suggesting that you repeat unfounded accusations.
However, technically, until the loan is drawndown after contracts are signed then the individual(s), spv(s), etc are not borrowers. It is merely a request for funding and a great deal of information is already in the public domain although many platforms, not necessarily MT deliberately choose to omit material facts. It is therefore necessary for individuals to spend a great deal of time and sometimes expense in discovering knowledge that is already known by the platform. Not satisfactory in my book and simply undermines the trust between the platform and potential lenders.
Without wishing to enter into a long dialogue - under FCA 'principles for businesses' - part 7 - 'A firm must pay due regard to the information needs of its clients, and communicate information to them in a way which is clear, fair and not misleading.'
I suggest many a platform falls foul of this requirement when presenting a lending 'opportunity' to investors.
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sqh
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Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Aug 12, 2019 18:25:21 GMT
............... We can’t of course, make guarantees and background checks won’t pick up on some things, and can’t take into account how someone will behave when things go wrong for them. We will be including more information about the borrower, key people and background in our new loans going forward. Lytham- Yes this should have been picked up at the time and we have since reviewed our processes in regard to checking valuations. The freehold/leasehold issue did not impact the eventual outcome for lenders as reported on the platform. ............. Kind regards Sophie SophieThingYou admit to making a mistake by stating that the Lytham property was freehold when it was actually leasehold, so why don't you compensate lenders for your mistake? It is nonsense to say that the leasehold had very little value, just because the buyer was able to purchase the freehold cheaply. My analogy would be ming vase with a piece missing is clearly worth far less than a complete vase, and the missing piece is worth very little on it's own, but put the two pieces together and the value soars. If MT had purchased the freehold, and sold both the leasehold and freehold together, the property would likely have fetched far more. Furthermore, if MT had purchased the freehold and were still unable to make a full recovery then MT could claim against the valuer.
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