News

March 22nd 2016, Daily News Digest, Lending Times

 

  • LoandDepot Avant partnership to share customers.
  • P2P regulation across the globe.
  • Fintex does European ABS bond emittance on ISIN, Euroclear and Clearstream.
  • UK FCA allows p2p investment advice from regulated advisors with regulated compensation scheme.
  • China’s own 2008 crisis.
  • Canaan liquidates some of it’s LC ownership.
  • Funding Circle rumors.
  • Open Lending raised $40m
  • RateSetter SyndicateRoom partnership to also share customers.

LoanDepot And Avant Announce Partnership To Help More Borrowers Access Credit, (PR Newswire), Rated: AAA

Under the agreement, these two FinTech platforms have teamed up through an API integration that will expand access to credit through a borrower referral powered by a seamless digital experience. As a result, responsible borrowers will have expanded access to credit products that better align with their financial needs.

More than 480,000 loans have been issued through the Avant platform with loan originations reaching more than $3 billion globally. The company recently closed a $325 million Series E funding round and has raised a total of $1.7 billion in debt and equity funding.

LoanDepot funded over $60 billion in loans since its inception. Headquartered in Southern California, loanDepot employs 5,200+ people across the country including 1,700+ licensed loan officers, and operates 150+ loan stores nationwide. The company operates under the brand names loanDepot, imortgage, Mortgage Master, LDWholesale and LDEscrow.

P2P Regulation Maturing Across The Globe, (Nasdaq), Rated: AAA

Although it might seem counterintuitive, P2P lending firms are actually lobbying for additional regulation in many countries around the globe.

US

The SEC finalized the crowdfunding provisions of the 2012 JOBS Act in October 2015. The good news is that the JOBS Act also contains provisions for a new class of P2P firms/crowdfunding platforms called “emerging growth companies” (must have revenues below $1 billion annually). These emerging growth companies are given several breaks, such as reducing the financial disclosures that are typically required in a securities prospectus, not having to provide an auditor attestation of internal controls over financial reporting (as required by Sarbanes-Oxley), and the choice of new or revised accounting procedures (when finalized).

UK, Spain, Germany, and Lithuania All Implementing New P2P Regs 

UK, Spain, Germany and Lithuania all implemented new rules in 2015, and several other Euro-area countries are likely to follow suit in 2016. UK’s FCA’s regulatory scheme has been in place a couple of years now, and firms are reporting from £100,000 to £1 million in initial compliance costs. Financial industry consultant Bovill also notes that over 100 P2P firms have applied for full UK FCA authorization as of the third quarter of 2015.

New P2P Rules Coming into Force in China

Experts argue that despite the endemic fraud in the sector, the government is still likely to implement the new P2P regulations gradually, as averting a “hard landing” for the Chinese economy is their primary concern.

New European P2P Lending Investor Opens its Doors, (Alt Fi), Rated: AAA

Comment: The real news it the bond issuance method and ABS in Europe, not the investment! Poorly chosen title.

Fintex Capital, a London-based institutional investor focused on established European P2P marketplaces, has today announced the successful completion of its first investment on a P2P marketplace. The investment boutique has selected Germany’s largest P2P marketplace, auxmoney, as the first P2P platform from which to purchase loans.

On the back of this transaction, Fintex Capital has issued a euro denominated bond, backed by marketplace loans, which it has sold to institutional investors. The company’s bonds are capital markets friendly, carrying an ISIN and settling through Euroclear and Clearstream. Fintex claims that the product is entirely unique within the market. The familiarity of the bond format is likely to remove some of the barriers that more traditional fixed income investors may encounter when looking at P2P as an asset class. Being able to represent trades in existing risk and reporting systems may seem like a small thing, but the reality is that the absence of these tools will likely deter many thousands of pension funds, insurance companies, high-net-worth individuals, private banks and family offices from investing in marketplace lending.

FCA allows FOS claims over P2P advice, (New Model Adviser), Rated: AAA

The Financial Conduct Authority (FCA) has confirmed that consumers who receive advice on peer-to-peer (P2P) lending agreements will have access to the Financial Ombudsman Service (FOS) and Financial Services Compensation Scheme (FSCS).

Advisers will need to apply for new permissions to advise on P2P agreements, which will also be allowed into ISA tax wrappers from April, but face funding a new levy stream to the FSCS if they fall within the D2 investment intermediaries funding class.

The FCA also confirmed that it would extend its ban on commission to P2P agreements.

FCA ignores industry warning on ‘impossible’ adviser P2P due diligence, (Professional Adviser), Rated: A

Respondents to FCA consultation, published in February, told the regulator “as a result of the difficulty in being able to measure risks associated with P2P agreements, there would be limited interest from existing advisers in advising on P2P agreements, and that these were likely to remain ‘non-advised’ investments unless this situation changed”.

Big News from the Supreme Court in the Madden v. Midland Funding Case, (Lexology), Rated: A

While far from certain, this development shows that the Supreme Court is interested in the case and will likely give weight to the Solicitor General’s recommendation as to whether the Second Circuit’s ruling should be reviewed. Stay tuned for more news after the Solicitor General files his brief.

With a Supreme Court that is operating with only eight Justices after the death of Justice Antonin Scalia, there is a possibility that, if review is granted, the Court could affirm by an equally divided court, which would only further extend the uncertainty caused by the decision in Madden.

Many marketplace lenders have been particularly affected by the Second Circuit’s decision, and some, such as Lending Club, have revised their contracts with banking partners.

A growing corner of China’s $2 trillion mortgage market looks a lot like the US subprime bubble, (Quartz), Rated: AAA

A complete article on this real issue :

The US subprime boom that eventually would trigger the 2008 global financial crisis started when lenders pushed outsized home loans on people without the wherewithal to pay them back. Normally, to get a mortgage in China, homebuyers need to put down at least 20% of a home’s value, and more in some big cities. But in recent years, these new players have stepped in, making it possible for someone with no savings at all to take out a mortgage. China’s top leadership is worried.

In a crucial difference between the US market, these zero-down-payment loans have not yet been turned into securities.

Comment: What will happen if the 2nd largest economy in the world goes into 2008-style crisis ? Article fails to evaluate consequences of such a crisis. 

Canaan Partners Vii Lowers stake in LendingClub Corp (LC), (Los Angeles Mirror), Rated: A

Canaan Partners Vii reduced its stake in LendingClub Corp by 14.79% during the Q4 period. The investment management company now holds a total of 25,933,675 shares of LendingClub Corp which is valued at $225,622,973 after selling 4,500,000 shares in LendingClub Corp according to the most recent disclosure to the SEC.LendingClub Corp makes up approximately 89.18% of Canaan Partners Vii’s portfolio.

Funding Circle Gears Up For Fresh Investment, (Pymnts), Rated: A

Just before the start of 2016, the company announced that it had reached in small business lending the £1 billion mark ($1.45 billion) since its launch in 2010. According to reports on Friday (March 18), the Funding Circle SME Income Fund is in the later stages of discussions with the European Investment Bank for financing, and while the company was mum on the details, it did say it plans to finalize the plans by the middle of this year.

Funding Circle was first rumored last July to be planning a float of its SME fund. The company had already secured multimillion dollar deals with investors, including a $420 million deal with Victory Park Capital in the U.S. and a $150 million fund by DST Global and other backers.

Bregal Sagemount Makes Significant Investment in Open Lending, (Business Wire), Rated: A

$40 million equity investment in Open Lending. Based in Austin, Texas, Open Lending specializes in loan analytics, risk-based pricing, risk modeling and automated decision technology for automotive lenders throughout the United States. The funds will be used to fuel further growth for Open Lending within the automated lending industry, and allow the Company to accelerate its expansion among financial institutions, credit unions, and regional banks. Previously Open Lending had raised $10m in 1 round according to Crunch Base.

Kabbage founders come out strongly against Religious Freedom bill, (Atlanta Business Chronicle), Rated: B

For folks who know us personally, and our company, Kabbage, it should come as no surprise that we are outraged about the recent passing of the so-called “religious freedom bill” (HB757) in Georgia’s House and Senate. The legislation includes what’s known as the “First Amendment Defense Act”, prohibiting the government from taking action against any individual or faith-based organization who takes action in contravention of same-sex marriage. This legislation also allows pastors to refuse to perform same-sex marriage ceremonies. Translation: the legislation exempts hate crimes committed in Georgia from prosecution.”

RateSetter Joins Forces With SyndicateRoom, ( Alt Fi News), Rated: A

Peer-to-peer lending platform RateSetter has entered into a unique referrals partnership with angel-led equity crowdfunder SyndicateRoom. The two alternative finance platforms will now refer businesses to one another depending on the specific funding requirements of those businesses. The dream scenario, we suspect, is that businesses that begin by taking on equity money atSyndicateRoom will in time develop to the point that a debt-based solution makes sense, which is when RateSetter comes in

RateSetter. The platform – which initially lent solely to consumers – published an update in November 2015, which revealed that 40% of its outstanding loan book was then comprised of loans to businesses (30% in commercial loans and 10% in property loans).

Cayman Alternative Investment Summit 2016 – The Conclusion, (Hedge Week), Rated: A

Tomorrow’s winners will be those who embrace the pace of change, particularly in respect to regulation; directives such as AIFMD, Dodd-Frank, and the more pervasive MiFID II, are forcing alternative fund managers to re-imagine their business and operating models to enhance the level of transparency. This, in turn, will help forge closer alliances with end investors as their desire for data and solution-driven outcomes continues to build.

From a global macro perspective, Emerging Markets will continue to provide individual opportunities for managers, especially as China embarks on its One Belt One Road initiative to link China with Europe (a 21st Century Silk Road in effect) and gradually opens up its capital markets to foreign investment. On the commodity side, energy MLPs provide attractive valuations, along with Argentina farmland, gold and timber, whilst in the credit markets, marketplace lending could begin to see more securitisation of loans and increased secondary market opportunities for investors going forward.

KoreConX Is Proud to Sponsor the AltFi Europe Summit 2016, (Digital Journal), Rated: B

Jofre will be present at the event to showcase KoreConX, an online tool that makes it easier for companies to access capital through equity crowdfunding, and to manage and communicate with their shareholders.

Author: George Popescu

About the author

George Popescu

Serial entrepreneur.

George sold and exited his most successful company, Boston Technologies (BT) group, in 2014. BT was a technology, market maker, high-frequency trading and inter-broker broker-dealer in the FX Spot, precious metals and CFDs space company. George was the Founder and CEO and he boot-strapped from $0 to a $20+ million in revenue without any equity investment. BT has been #1 fastest growing company in Boston in 2011 according to the Boston Business Journal and the only company being in top 10 fastest in 2012-13 as it was #5 in 2012. BT has been on the Inc. 500/5000 list of fastest growing companies in the US for 4 years in a row ( #143, #373, #897 and #1270). After the company sale in July 2014 until February 2015 George was Head-of-Strategy for Currency Mountain ( www.currencymountain.com ), a USD 100 million+ holding company focused on retail and medium institutional currencies, precious metals, stocks, fixed income and commodities businesses.

• Over the last 10 years, George founded 10 companies in online lending, craft beer brewery, exotic sports car rental space, hedge funds, peer-reviewed scientific journal ( Journal of Cellular and Molecular medicine…) and more. George advised 30+ early stage start-ups in different fields. George was also a mentor at MIT’s Venture Mentoring Services and Techstar Fintech in NY.

• Previously George obtained 3 Master's Degrees: a Master's of Science from MIT working on 3D printing, a Master’s in Electrical Engineering and Computer Science from Supelec, France and a Master's in Nanosciences from Paris XI University. Previously he worked as a visiting scientist at MIT in Bio-engineering for 2 years. George had 3 undergrad majors: Maths, Physics and Chemistry. His scientific career led to about 10 publications and patents.

• On the business side, Boston Business Journal has named me in the top 40 under 40 in 2012 in recognition of his business achievements.

• George is originally from Romania and grew up in Paris, France.

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