News

April 14th 2016, Daily News Digest

  • 1st European securitization by UK’s Funding Circle.
  • US securitization turbulence forces lenders to rethink funding sources.
  • Westpac Australia adds AUS$25mil provisions for personal loans defaults due to commodity prices.
  • LendingHome opens crowdfunding to compete with Patch of Lend, Realty Shares, Sharetates, etc.
  • UK’s p2p market doing great, but why ?
  • CreditClimb focused on student loans raises $2m and $400m wearhouse.
  • India: Deal4loans originated $1.57bil and raised new round, KredX raised, LenDen raised.
  • Malay regulator clarified p2p financing smartly.

 

First European Marketplace Lending Securitisation Achieves Aa3 Rating, (Alt Fi News), Rated: AAA

Reports have surfaced that Deutsche Bank has been mandated to arrange a European marketplace loan securitisation of loans originated by Funding Circle, the UK’s largest SME marketplace lending platform.

The super senior tranche has been assigned a provisional rating by Moodys of Aa3 – the fourth highest rating that Moodys gives and a full six notches above the rating assigned to the senior tranche of the first publicly rated marketplace securitisation, managed by BlackRock in January 2015.

The Moodys pre-sale report details that the securitisation has a term of eight and a half years (albeit the pool of loans is static with an average remaining term of 3.7 years). Six tranches will makeup the securitisation. The four senior tranches will be rated Aa3 to Ba2 with the two most junior tranches being unrated. The top-rated tranche is £88.4m and its Aa3 rating will give it appeal to investors who have thus far not been attracted to European marketplace lending.

The total size of the transaction is targeted to be £130m which equates to just over 2 months total origination for the Funding Circle platform.

Securitization Market Turbulence Forces Marketplace Lenders To Rethink Funding Models, (Forbes), Rated: AAA

In 2016, marketplace lenders were reminded that institutional capital can be fickle.

According to Canaan Partners, the weighted average spread of marketplace securitizations has increased from 200 basis points in 2015 to over 500 basis points in March.

Hedge fund investors have become less willing to write big checks. And all of this is coming at a time when marketplace lenders thirst for capital is growing rapidly. SoFi CEO Mike Cagney noted that the industry is reaching an inflection point because of its success. According to Cagney, “when you originate $1 billion a month, you need to have a take-out.”

But, more importantly, the winning platforms are demonstrating a diversity of funding sources. Small platforms overly reliant on hedge funds buying loans will be particularly exposed in 2016.

Many banks are rich in deposits but do not have the capabilities or expertise for consumer lending. Banks have an enormous amount of balance sheet capacity and they understand credit.

SocietyOne’s Yetton: loans soar as banks struggle, ( The Australian), Rated: AAA

Comment: Article covering the Australian market.

SocietyOne yesterday revealed $30m of new personal loans and agribusiness finance had been written in the first quarter.

According to SocietyOne, problem loans — defaults and total impaired loans — are running at 70 basis points of the portfolio. Defaults, arrears between 90 and 179 days, are 50 basis points.

Westpac recently flagged an additional $25m in provisions in retail banking, mostly related to “pockets of stress in personal loans” in Western Australia, which is struggling with the effects of lower commodity prices.

 

LendingHome launches crowdfunding platform, (The Real Deal), Rated: AAA

The firm’s new crowdfunding offering will compete with platforms like California-based Patch of Land, which also offers notes tied to first-lien mortgages to small-time investors.

Expanding from institutions to individual investors, who can now buy notes tied to mortgages for as little as $5,000, expands the platform’s investor base, argued Humphrey.

LendingHome claims to have originated $550 million worth of mortgages since its 2013 launch, with $220 million returned to investors. Its average loan size is between $150,000 and $200,000, with a loan-to-value ratio of a little over 70 percent.

LendingHome is backed by more than $100 million in venture funding.

 

Marketplace lending: How the industry is dealing with securitisation – and does having skin in the game really matter?, (City A.M.), Rated: A

Interview with Perry Rahbar, formerly of Bear Sterns and JP Morgan and founder and chief executive of Dv01

Is securitization necessary to keep the industry afloat? Between Lending Club, Prosper, SoFi and Avant you’ll probably have over $30bn in loan originations this year, the capital markets, and securitisation, is an essential part of funding that growth. It’ll become even more important as some of the larger whole loan buyers scale back their purchases.

These platforms offer a wealth of data to their whole loan investors but a lot of that doesn’t make it into securitisations because it’s not necessarily something that’s required, but I think it would go a long way towards making these deals different and better than the status quo of the securitised markets.

Of course, your incentives are in line with investors when it comes to performance if you hold loans on balance sheet. But most platforms’ business models are levered towards performance already, since they don’t have permanent, or termed, capital. Meaning that if you do anything poorly or your loans don’t perform, there won’t be a bid for your loans and the market has effectively taken you out. You don’t even need to do anything bad necessarily, there’re so many lenders out there that I think some of this will happen naturally as investors will desire to own risk from the more established lenders who’s loans are more liquid.

The subdued mood at the LendIt USA conference this week highlights why the UK market is increasingly the envy of the world, (City A.M.), Rated: AAA

It is too late for US marketplace lenders to implement regulation before achieving scale, but it’s the right time for them to get behind the MLA’s demands for common sense, countrywide supervision.

Conversely, the UK market can pride itself on its international perspective. Looking beyond borders for inspiration, lessons to learn and cross-collaboration is what makes the European marketplace lending market diversified, buoyant, and arguably more confident of its own survival in the face of economic challenges.

If this week’s keynote speakers are right, change is coming in the US marketplace lending market. With interest rates uncertain, funding down, more regulation and less credit appetite, we will certainly watch a shakeout among lenders.

While London lenders may lack the size and scale of their US peers, the UK is, genuinely, nurturing a marketplace lending market that will become the envy of the world.

What Indian Fintech Industry needs to learn and know – perspectives from Lendit, San Francisco, (Your Story), Rated: A

Comment: Article covering the Indian market.

Next generation underwriting
Risk compliance and regulation
Benchmarking to an index and providing returns
Securitisation and Hybrid Models
Customer acquisition
Information verification

With close to 2,000 alternate lending platforms in China and multi-billion dollar originations by LendingClub in US, India is a significantly smaller entity in the Alternate Lending and Fintech space. It is crucial for Indian startups to take cues from the success stories around the world and ensure the right mix of underwriting and operations to build the next big Lending company for the next billion.

 

Credit Climb Shakes Up Student Loans, (Pymnts.com), Rated: A

Climb Credit, a new startup in the student lending market is getting some attention, as well as a $400 million lending facility. The company has also raised a small, $2 million venture round to fund its operations.  There’s a growing number of startups trying to step in with solutions, including options to help those students refinance loans.

Climb Credit has 40 schools that it works with across 70 campuses.

P2P lending: These are the nine key trends in alternative finance, (City A.M.), Rated: A

VCs are less interested in P2P lending
The alternative finance world is going to get smaller ( Comment : I entirely disagree with this statement).
Millennials expect banks to die.
Getting a loan is faster than ever.
Alternative student finance is hotting up (at least across the pond).
China might surprise us all ­when it comes to regulation.
Securitisation is necessary – but more standardization is needed.
Rise of the specialist white label company.
Fintech: Watch out for the banks?

 

Peer-to-peer lending industry grows up, (Business Review), Rated: A

Comment: Article covering the Australian market.

“Last year everyone was drinking a bit of the Kool Aid because Lending Club had just done their IPO, there was a lot of money in the market, the VCs were there and were definitely keen to do deals,”

“This year there’s a bit more realism about — it’s a long haul and you’ve got to be good.”

“What we’re seeing is some element of conservatism around credit,” he said. “Confidence is a bit lower so we’ve got to be cautious about underwriting standards.”

 

SC facilitates peer to peer financing, (The Start Online), Rated: A

Comment: Article covering the Malay market.

The Securities Commission (SC) announced the regulatory framework for peer-to-peer financing (P2P), paving the way for small and medium-sized companies to access a new avenue of debt funding. The guidelines do not allow personal loans to be raised via the new platforms.

“The P2P framework will enable sole proprietorships, partnerships, incorporated limited liability partnerships, private limited and unlisted public companies to access market-based financing to fund their projects or businesses, via an electronic platform,” the SC said in a press release.

The SC will begin to take applications from parties wishing to operate a P2P platform beginning 2 May 2016. Such parties must be locally incorporated and have a minimum paid-up capital of RM5 million.

Other salient features of the Malaysian P2P framework are that the rate of financing cannot be more than 18%.

Sophisticated and angel investors intending to lend money to issuers on P2P platforms are not limited to any amount. But retail investors are highly encouraged to limit P2P investment exposure at RM50,000 at any one time

Loans Marketplace Deal4Loans Raises Funding From WhatsApp’s Neeraj Arora And Others, (Inc 42), Rated: A

Comment: Article covering the Indian market.( Per my calculations Deal4Loans originated $1,57 Bil to date) 

Founded in 2009 by Rishi Mehra, Deal4Loans is a B2C loans marketplace.

Deal4Loans has facilitated disbursal of more than INR 10,000 Cr. in loans through its platform. ( Per my calculations it represents $1,57 bil)

Noida-based Deal4Loans, a B2C loans marketplace, has raised an undisclosed amount of funding from high-profile investors. These investors include Ram Shriram (founding board member and one of the first investors in Google), Neeraj Arora (WhatsApp global business head and a Board Member of Paytm), and Puru Vashishtha (previously an investor in Wall Street hedge funds including Soros Fund Management).

India Funding Roundup: An Invoice Discounting Platform, Lending Club, and More, ( Gadgets 360), Rated: A

KredX, an invoice-discounting platform, has raised $750,000 (roughly Rs. 5 crores) in a seed funding round from Prime Venture Partners. Founded by IIT and Stanford alumni Manish Kumar, Anurag Jain, and Puneet Agarwal in 2015, the platform connects credit-worthy SMEs (small and medium enterprises) looking to raise working capital (against their unpaid invoices) to individual financiers looking for opportunities to earn above-average financial returns.

Peer-to-peer lending platform LenDen Club has raised an undisclosed sum of funding in a seed funding round from Venture Catalysts, a seed stage investor. Founded in 2014, LenDenClub connects salaried borrowers to individual lenders on its Web-based platform. The platform considers a combination of traditional and non-traditional data points to validate the credit-worthiness of the lender, and said that it has arranged more than 150 loans till date.

Global Debt Registry Enters Marketplace Lending Space, (Press Release), Rated: A

By leveraging GDR’s deep experience in validating loans in the accounts receivables market, the company aims to support the safe and sound growth of capital investments in marketplace lending.

“Marketplace lenders are looking for more mature permanent capital to continue the impressive growth this industry has witnessed over the past few years,” said Mark Parsells, CEO and Executive Chairman of GDR. “By leveraging the extensive experience we have as a trusted partner in other lending sectors, we are committed to help grow the capital base for this innovative new lending model, providing the independent certainty in the underlying assets demanded by mature investors.”

GDR’s secure, PCI compliant digital platform is currently used by over 50 financial institutions for the tracking of ownership and validation of account information of consumer loans in a variety of asset classes including auto finance, credit cards, student loans and medical debt.

Online lending taking off, ( The Bay State Banner), Rated: A

National Federation of Independent Business, a Washington, D.C.-based small business support organization with 325,000 members and offices in all 50 states, go public with its plans to make cash from automated lending company Kabbage available to its members with the click of the button. Such a deal with the 70-year-old NFIB helps push the clout of online lending into the realm long enjoyed by banks.

Direct Lending Income Fund Named Best Credit Fund – Long Term Performance at The Investors Choice Awards, (Press Release), Rated: A

Direct Lending Investments LLC (www.dirlend.com), the leading private investment firm focused on short-term small business loans purchased from non-bank lenders, announced today that its Direct Lending Income Fund has been named Best Credit Fund – Long Term Performance at the Investors Choice Awards in New York.

New P2P lending problems emerge, (ECNS), Rated: A

Comment: Article covering the Chinese market.

Easy Richness, which reportedly has drawn more than 10 billion yuan ($1.55 billion) in investment, said it was unable to pay back investors as the company’s bank accounts have been frozen by police.

rowerp2p.com, which has over 10,000 investors and more than 10 billion yuan in investment, was reportedly investigated by the police because of illegal financing, domestic news portal yicai.com said Tuesday.

In the first quarter of 2016, about 260 P2P platforms reported problems in their business operation, up 42.08 percent year-on-year, news portal cngold.com.cn said Monday.

“I prefer to choose P2P brokers founded by large and well-known firms, which could secure investors’ interests to some extent,” he noted.

Lenders That Accept Personal Loan Co-Signers, (Nerdwallet), Rated: A

A co-signer is responsible for paying the loan if the borrower defaults and doesn’t typically benefit from the proceeds of the loan. A co-borrower or joint borrower, though, is not only equally responsible for the payments, but also appears on the title to the car or home used as collateral. Since there is no collateral for unsecured loans (such as personal loans), the terms “co-signer,” “co-borrower” and “joint borrower” are often used interchangeably.

Wells Fargo and Citibank have the option of adding a co-signer to personal loans.  Most credit unions allow co-signers on unsecured loans (also called signature loans), and they accept online applications. The maximum APR that federal credit unions can charge is 18%.

Online Lenders that accept co-signers:

Vouch
Backed
Light Stream
Lending Club
OneMain Financial

Neyber Appoints Former Zopa Employee Paul Martin Head of Credit Risk, ( Crowdfund Insider), Rated: B

Neyber was founded by former Goldman Sachs investment bankers Martin ljaha and Monica Kalia along with financial technology executive Ezechi Britton.  The company provides access to credit via an integration with an employer payroll and services system thus dramatically lowering lending risk while providing a service for employees.

Neyber, announced on Wednesday it has appointed former Zopa credit risk director, Paul Martin, as its new head of credit risk.

 

Author: George Popescu

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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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