The Sunday Telegraph article (24 09 2017)
We think it is worth correcting some of the misleading information from the Sunday Telegraph article. First, lenders through the Lendy platform have, to date, suffered no losses of principal on loans, and the company has so far returned £29.5 million in interest alone to lenders. Repayments of principal include a further £137.8m.
The Lendy platform offers lenders loans with a range of risk/reward ratios, with interest set at between 7% and 12%. The company never lends at LTVs above 70% (with the majority closer to 60%) and all property is professionally valued by independent RICS-registered valuers. We have introduced a rigorous due-diligence process to ensure all loans are stringently assessed before being offered on the platform.
Lendy’s loan book stands at £166 million. At present, 13% of this loan book is classed as being in default – this is normal for the bridging and development loans market. If you include repaid loans, then the default rate falls to 7.4%, which is typical for lending on more complex property investment projects where events such as delays to planning permission, and lengthy negotiations with local authorities can frustrate progress.
In cases where a borrower defaults, Lendy may recover lenders’ principal through sale of the security. In cases where sale of the security does not cover lenders’ principal, Lendy operates a discretionary provision fund and will aim to cover the capital shortfall if appropriate. At present, the provision fund amounts to more than £2 million in cash and assets.
We state clearly on our website that lenders should not however rely on the provision fund when making a decision to lend. Lenders should ensure than any loan they make matches their risk appetite.
In respect of the cases mentioned in the article, while there have been delays to the sale processes, Lendy has offers for the properties in excess of the lenders’ principals, and its professional advisors are confident that these should be sufficient to repay lenders’ principal in full when the sale process completes.