It was announced late in the evening on 24/05/2019 that the P2P lending platform Lendy Ltd has entered voluntary administration. On a statement on the FCA’s website it has also been announced that the FCA themselves will run an inquiry it what caused the collapse of Lendy Ltd. The administration covers the three core companies of the Lendy platform: Lendy Ltd, Lendy Provision Reserve Ltd and Saving Stream Security Ltd. There are at least three other companies associated with the director of Lendy that are not covered by the administration.
Many Lendy investors will see this administration as a realisation of the inevitable. Lendy has been in serious trouble for over 12 months, following a catalog of incoptenacies and miss truths it had all but destroyed confidence and support from its core lender base. This resulted in the secondary market place grinding to a halt, effectively locking in investors to loans. On the 11/03/2019 it was publicised that Lendy had been put on the ‘FCA’s Special Watchlist’ since January 2019 as concerns were growing about its ability to meet the minimum regulatory standards. Then on the 23/04/2019 Lendy notified lenders via it’s platform that it was experiencing banking issues, shortly after the FCA announced it was imposing further restrictions on Lendy’s operations. Lendy consistently claimed the banking issues were a technical issue and it was being resolved, however many lenders who are aware of how Lendy operatesand the little regard it has towards it’s lenders, possessed the capacity to assume that these too events were inextricably linked, regardless of what Lendy claimed.
Other issues with the Lendy platform included, wildly over valued properties (which personally I hope will be looked into as part of the FCA inquiry). An almost total ineptitude/unwillingness/unpreparedness to handle and resolve problematic loans and recover securities. A seeming endless stream of monthly loan updates that in time proved to be irrelevant and non representative of the reality. A revolving door of staff appointments, particularly a number of high profile six figure appointments that seemed to last mere months. The threat of a direct legal action against the platform and all borrowers to the associated loans (that legal action has recently been thrown out of court, for being baseless).
For now the website remains live, I advise anybody who has not already done so to screenshot their loan holdings, account balance and download the Excel file while you still can.
Many Lenders have filled formal complaints to both Lendy and the FCA over the last 12 months so there is hope that the truth can be easily uncovered by the inquiry, however losses should be expected. On a personal note I am very fortunate that I have not lent new money through the Lendy platform (as published in a previous post) for sometime so my exposure is minimal, but my heart goes out to those that are significantly exposed especially those that have pension size investments tied up in this administration. Even worse are those lenders tied up in the Collateral UK fiasco too, (for I am too). This is the second sizable P2P platform failure in 12 months, Collateral UK circa £20 mil loan book, Lendy circa £200 mil loan book value. I have no doubt that this latest P2P platform collapse will force the wider P2P industry and the regulator to look in the mirror once again and ask what is going so wrong for this to keep happening.
I have got to 18 months lending through the Lendy platform and the results are follows –
Expected ROI (Annualised)
Actual ROI (Annualised)
In my previous Lendy review ( Lendy Results – 12 Month ) I was quite critical of Lendy and made clear that if things did not improve that they would not continue within in my portfolio. I’m afraid things have not only not improved they have got considerably worse.
The ‘Expected ROI’ is taken from the average headline return of the loan parts I hold. The ‘Actual ROI’ is what was achieved over the previous 12 months and at 2.39% theres is clearly something seriously wrong with this picture. It should be repeated that I only hold a remnant of ‘bad/unsellable’ loans with Lendy so the the returns should naturally be underwhelming, that said all of remaining loan parts are overdue payment some approaching three years. Total recovery on these problem loans has been less than 1.00% of balance over the last six months, which is pitiful.
Lendy and approximately 5000 lenders are now also facing legal action via one particular borrower for substantial damages, this is a live legal action so i can not comment on the merits of the claim, but all I would say is nobody saw this coming or even considered this a possibility. Further to this it would appear Lendy have actively attempted to manipulate review sites by not only removing even slightly negative reviews within minutes of posting but also replacing them with very dubious positive reviews that read as if the poster has little internal knowledge of the platform (ie.possibly paid for reviews), unfortunately this can’t be proved unequivocally without access to internal databases, which of course will never happen, but I think the damage to integrity with the lender base who are aware of this situation, has already been done.
It’s looking very bleak for Lendy and it’s difficult to see how it will ever turn things around and rebuild trust with it’s lender base. Lendy unfortunately seem to have viewed it’s lender base with absolute contempt over the last 12 months. I have made the firm decision to no longer invest with Lendy and as a result all referral links with-in this blog have been removed. Even if Lendy miraculously recover the outstanding funds and return to a double digit projected annual return over the next 3 months there is no-way I will return (at least under current management) as their integrity, in my eyes at least has been destroyed. I will still continue to report on Lendy every 6 months while a balance remains outstanding but only in the capacity of a recovery.
1 year has now elapsed since i started investing with Lendy and the results are as follows –
No. Live Loan Parts
No. Loan parts with repayments overdue
To compare these 12 month results with the previous 6 month results, the ‘Expected ROI’ has been reduced as i picked up a couple of 11% loan parts rather than the usual 12% loan parts. As for the ‘Actual ROI’ i should point out firstly a change in strategy. Several months ago i decided to sell off all my healthy loan parts and withdraw 20% (the most i could sell) of my liability from Lendy. This was a result of increasing concern about the lack of action on deteriorating/overdue loans. This action has been a factor in the gap widening from ‘expected’ to ‘actual ROI’ from 61.83 % to 68.13 %, although even with this factored in the trend is still diminishing returns, as part of the return is made up from affiliate credit earned through this blog.
Loan parts were also reduced in the sell off from 16 to 12. A massive 9 (10) of 12 are over due or in difficulties. The possible 10th is one the most perplexing instances i have seen from Lendy. This was a London based property loan that went live before due diligence was complete and it was quickly discovered that the borrow did not have the facility to repay the loan. As a result secondary trading of the loan was immediately suspended and hence investors have now been left holding a loan they can not dispose of as a result of Lendy making a rookie error. I should add though at this time interest payments are being made but i believe Lendy are being very optimistic to dispose of this loan with in the agreed term, so i believe this is destined to become yet another overdue loan.
I have drastically changed my strategy over the last few months from fairly passive to aggressively selling loan parts very early. Despite this returns have continued to diminish. Some loan parts in possession are now approaching 500 days over due with little end in sight. While some loan difficulties are understandable, i.e legal process such probate where Lendy has zero control for a protracted period. There are other loan parts that have promised resolution by the end of the month, month after month with no action. I also have concerns that several huge loans (plus £10 mil) have gone live with Lendy in the last couple of months, given the recent administration of Collateral UK , with an £8.5 million loan being a possible contributing factor, this makes me a little nervous. While i’m not suggesting such a drastic outcome for Lendy given their much bigger investor base and larger cash reserves, it is still increasing risk to a larger number of investors and if the loans were to fail the shock waves could very worrying.
Lendy has also announced that it will be Cowes Week title sponsor again this year, personally i’m ambivalent about this as i didn’t really witness much of uptake of new investors after last years sponsorship, but i have a very small window in to the platform. Lendy has also introduced an improved friend referral scheme. A referral through a unique link (as i use on this blog) now results in a 5% (up from 1%) share of the new friends account interest for the first 12 months, based on £1000 minimum deposit, plus a £50 bonus for both the introducer and the new customer, based on £1000 being invested for 3 months consecutively. This potentially now makes Lendy’s referral scheme one of the most generous on the market.
As for Lendy’s future within my portfolio, i have already taken steps to reduce my liability and will continue to reduce to a predetermined level when i am able to. I would need to see some serious action and repayment of the problematic loan parts over the next 6 months to consider Lendy having a long term future with-in my portfolio.
So the results are in for the first half of 2017 (financial year) of investing through the Lendy platform and the headlines are as follows ;
No. Live loan parts
No. Loan parts with repayments overdue
As you can see the actual return on investment is significantly lower than the expected return on investment, there are a number reasons for this. Within days of starting this analysis Lendy decided to make a few changes. Firstly reverting back to its Lendy branding (formerly Saving Stream) , as well as this they announced that some of the new loans going forward would not offer the 12.00% ROI, I have seen some as low as 8.00% ROI. However this change should not affect my current investments as they are all 12.00%.
So one reason for the discrepancy comes down to my own strategy. In the name of testing the platform out, once I noticed some problematic loan parts that may be going in to default, I tried to sell on the secondary market. Unfortunately while the loan parts are awaiting a sale on the secondary market they cease to earn interest. The overdue loan parts were all on and off the secondary market over the first 3 months with all 6 being up for sale at the same time for a 3 week period. It was disappointing that not one of them came close to being sold. When selling loan parts they join the back of the queue and the closest I got to a sale was at the back of £30,000 queue, which had only progressed £2500 in 3 weeks, so by that rate it would have taken over 6 months to even get to the start of the queue. So i decided to pull the loan parts from sale. Either way i am not earning interest on these loan parts either because they are queued for sale or they in default/overdue not earning interest anyway.
Now I should clarify a few things, Lendy have updated their policy during this period, to paying interest on ‘queued for sale loan parts in the secondary market’ on request of the financial conduct authority (FCA) as part of the company’s maturing regulation compliance. However defaulting loans, logically still don’t pay interest, so doesn’t much help my situation and I will observe and report back how the new changes work out over the next period. Additionally as part of the compliance update you can no longer invest in over due/defaulting loans, some might say that should have been the case from the start but it’s a step in the right direction.
There has also been a potentially exiting development introduced in July called ‘Bonus Accrual‘. This could be seen as Lendy’s attempt to combat a seller biased secondary market place. Essentially you can earn up to extra 0.50% a month (6.00% PA based on a 12.00% investment) for holding on to your defaulting loans during the remaining tolerance period, paid once the loan is recovered. This is designed to assist developers close to completion get the job done sooner so the debts can be recovered from the sale of assets. Since this was launched a couple of months back i have continued to accrue this bonus interest on all 6 problematic investments but nothing has been paid as these loans continue to be experiencing problems.
To conclude I would describe my experience in the 1st half of 2017, using the Lendy platform as mediocre. I love the look of the platform and the ease of use. However the liquidity of the secondary market could best be described as sluggish. The rate of defaults is stark but changes have been implemented to combat this. I do have concerns that the expected ROI is delivering to not even 40%, even by extrapolating the problematic 6 loan parts missing interest, and the playing about with the secondary market, there still seems to be a discrepancy of some 2-3.00% . However investments should always be viewed in the longer term so i will continue over the 2nd half of 2017 in a hope that this situation improves, but it’s been a rocky start to say the least.
Lendy started life in 2012 but operated as the Saving Stream peer-to-peer lending platform until spring 2017 before reverting back to the Lendy name. Lendy operates exclusively in the UK real estate market by providing loans to both existing property purchases and new property development’s.
The platform offers property backed investments lent at no higher than 70.00% of the property value. The investor is free to choose from a variety of property providing there are loan parts available to purchase at the time of browsing. Interest is earned daily but paid monthly (first day of the month) on active investments.
There is no minimum account deposit or withdrawal for Lendy, with average advertised annualised return of 12.00% per annum (Rates can vary across properties). Loans tend to be for 6 month terms. An investor can either reinvest monthly interest or withdraw it. Lendy also operates a secondary market place to allow investors an early exit option if needed. All properties available for investment on this platform include an investment pack detailing everything you need to know about the loan arrangement, including intended use of borrowed capital; schedule of capital delivery; due diligence; surveyor reports; independent property valuation reports and much more.
The property investment page
The main page for the Lendy platform displays a list of properties currently available to invest in. Information displayed is as follows –
DFL013 – Is a unique reference number given to each property used for a quick reference when referring to a specific property.
Richmond Road, Bradford – This is the location of the property.
13/01/2017 – This is the date of the start of the loan agreed between the borrower and Lendy. This does not change even if the repayment schedule is restructured.
The photograph – Shows the property described.
Loan – The total value of the loan agreed between the borrower and Lendy.
Loan to value – This is the percentage value of the loan against the independent valuation of the property or development. Lendy will lend to a maximum security of 70% against the property value to accommodate market pressures or potential default and recovery proceedings.
Amount available – This is the current amount available to an investor. If a loan is fully invested in at any given time it will not appear on the investment page by default. Loans can become available again if another investor decides to sell their loan part on what’s known as the secondary market. In fact most of what you see on investment page is actually secondary loan part sales. New properties (primary’s) tend to snapped up quite fast in the first instance.
The account page
Balance – This is the total amount of money you currently have on the platform. The figure is made up of funds deposited, plus funds invested, plus interest earned from previous months (does not include the current part month interest until its paid out on the first day of the month) minus any losses through defaults.
Live loan parts – Shows how much you currently have invested in live loans.
Available funds – Is any money in your account not currently invested in a loan part. When interest is paid at the end of the month it will show as available funds, until you either reinvest it of withdraw it in to your bank account.
Export to Excel – A handy little button that allows you to download all your account figures in to an excel document, handy for record keeping and tax calculating.
Drawdown – This quite simply means the borrower has started to access and spend the money they have borrowed, meaning the loan is active and investors interest will be calculated at the rate as outlined in the investment pack. It is not uncommon for larger loans to be broken down into smaller development tranches, with the borrower required to achieve defined milestones before the release of the next wave of funds. This is mealy an additional security measure designed to limit the impact of a potential default. Details of such arrangements can be found in the investor pack attached to the property.
Remaining – This shows in days the time left on the original loan agreement. The common loan term for Lendy is 6 months but can vary as agreed in the terms of the loan between Lendy and the borrower. If the remaining time is show as a negative number this means the original repayment deadline has elapsed. This does not necessarily mean the loan has defaulted. It usually means the terms have been adjusted, so repayment may take longer than originally expected, however interest will still be paid to investors every time the borrow makes a repayment. Specific details of the loan progress can be found in the investment pack and are also summarised in a weekly email to all investors on the platform. Total default and recovery proceedings are a last resort following exhaustive renegotiation and repayment restructurings.
Amount – This column indicates the amount of money you currently have invested in any single investment. There is no minimum amount you need to invest meaning you can directly reinvest all of your monthly interest if you like, maximizing your returns.
Interest – This is the total amount of interest earned on each loan part to date. The amount will include any interest gained in the month but not paid (at the end of the month). It’s also worth noting that this shows the total interest earned for the duration you have been invested in that loan part ie. if you have been invested for two months it will show the total for the two months not just the amount for the current month.
The secondary market
The Lendy platform operates what is known as a secondary market. This is essentially an early exit option for an investor if they need to release invested capital before the end of the loan term. How this works is actually quite simple.
Find the loan part you want to sell from the list on your account page, click on it and click on ‘sell loan part’. It will take you to a page detailing the property, scroll down and you will see the box show in the picture above. You can sell all or a portion of the loan part by using the slider or typing an amount in to the box. The ‘sale queue’ on the example above is £97,193.13 . This means if the loan part was to be put up for sale it would have to wait for the queued balance to be sold first. The flip side of saleque is the value available for investment of that property shown on the property investment page at that given time.
As soon as a loan part is queued for sale it will no longer gain interest. If you were to cancel the sale of the loan part it will return to earning interest. There are no transaction charges involved with either selling or canceling sales of loan parts on the Lendy platform. It’s worth noting that the secondary market is still a marketplace requiring demand for loan parts being sold, if there is low demand it will take much longer for the sale que and then your loan part to be sold. So the balance between offloading investments and losing potential interest is something of a personal preference and will probably take a bit of experimenting to work out what’s best for you.