UKPP Conference 2015: P2P -

UKPP Conference 2015: P2P - "An accident waiting to happen"



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A panel discussion at last week's UKPP London Property Finance Conference questioned the impact of peer to peer lending on the property market….

A panel discussion at last week's UKPP London Property Finance Conference questioned the impact of peer to peer lending on the property market.

The event, which was held at the Building Centre in London, featured an industry overview by ASTL Chief Executive Benson Hersch as well as a presentation by Jackson Cohen Director Ray Cohen on the future of compliance and regulation.

However, the main event of the afternoon was the panel discussion on real estate finance after the general election. 

Chaired by UKPP CEO Mark Antscherl, the panel featured industry experts Richard Hemmings, Senior Manager at Close Brothers; Paul Turton, Business Development RBS NatWest Coverage at Real Estate Finance; Joshua Elash, Director of MT Finance; Andrew Kennedy, Associate Director of Finance at UK Deal Room and Chief Executive of Regentsmead, James Bloom.

Topics such as the funding market post-election, the London housing bubble, the impact of a base rate increase, the importance of overseas investment and the forecast for the upcoming year were explored.

But the dominant topic of discussion was the impact of a non-regulated P2P funding platform on the housing market and whether crowdfunding could work. 
 

Joshua Elash stated he had qualms with the platform as it was a non-regulated industry which was a cloud hanging over P2P lending.

“I think that there are some interesting and innovative lenders in that space and we have Funding Circle and LendInvest who are doing well,” said Joshua.

“I think there are a number of very reputable peer to peer platforms who are now operating in the UK but, speaking with people in the banking industry on the regulatory side of matters, there is a common concern that they are acting as unlicensed firms and are not obtaining the capital adequacy required.

“Their incentive is to just do deals, and there is no real emphasis on underwriting and there is a danger that lenders are just pushing deals out of the door.

“The danger is that if you fail to obtain funding with a high street bank, you fail to get anything from an alternative lender and therefore the only option is the peer to peer sector; there’s a danger that it becomes the garbage men of the lending industry.”

 However, Paul Turton disagreed as he felt the platform was a good idea and could create the opportunity for investors to invest in their community. 

“For instance if you live in a city or a town and you are funding a local development, you can almost assess that development with your own local knowledge,” said Paul.

James Bloom agreed that funding local projects in the community was a good idea but warned the platform was “an absolute accident waiting to happen”.

“First of all, it is only working as well as it is at the moment because you can’t get any yield anywhere else,” said James.

“If and when we see an organisation of real returns, those returns then won’t be as attractive but there is absolutely no way that the average investor understands what they are investing in especially with the underwriting concerns.

“When you move into property it’s a whole different ball game because you are learning every day so how can you possibly know that an investor understands the underwriting process?

“The principle is good and there are certain situations where it is fantastic but there are some very scrupulous people in the industry and what will happen is that when the Mr Smiths go crying to the regulator in their multiple numbers it will bring the industry back.”

Adding to the concerns Laurence Goodman, Managing Director of Bridgebank Capital, said after talking to the regulator about P2P he believed the panel was absolutely correct to voice concerns. 

“It is an accident waiting to happen, it is going to be the next major regulatory investigation, it’s got short shelf life and it will be closed down,” said Laurence. 

“The FCA’s primary objective is consumer protection and most of the people pumping money in are not classified as sophisticated, intelligent investors, and they don’t like it, and they want to close it, and apart from a small amount most P2P lenders have got massive knowledge gaps in underwriting capability.”

James added: “I was talking to a crowdfunder who was looking to move into property lending and he said, ‘5 to 10 per cent of our loans may go wrong if the market collapses’, and it’s comments like that which show some of these guys don’t have a clue what they are talking about.”

The event was the UKPP’s first half-day CPD-certified conference in the capital.

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