The House Crowd collapses as P2P lending sector dealt another blow

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  • 01/03/2021
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The House Crowd collapses as P2P lending sector dealt another blow
The House Crowd has become the latest peer-to-peer (P2P) property lender to go into administration due to its financial issues.

 

The Financial Conduct Authority (FCA) confirmed that administrators from Quantuma Advisory had been called in last week to oversee the firm.

House Crowd offered bridging and development finance loans to property developers through peer-to-peer finance, with investors funding the loans offered returns of up to 10 per cent.

The firm provided sporadic updates of how its loan book was performing with the most recent details published up to October 2019 showing more than a quarter of loans had defaulted since its launch, with 10.7 per cent in default at that time.

This included a 180-day tolerance period for overdue loans before they were declared in default.

However, the lender claimed no client money had been lost at that point.

A year later, last November, data about its loan book was not included in performance metrics posted on the site.

At that point it said £68.5m in capital and £8.6m in interest had been paid out from 1,812 projects to 60,254 investors since launch in 2013.

 

‘Virtually unlimited crowdfunded monies’

One teaser to tempt bridging loan investors on The House Crowd site said: “Our peer to peer lending investments, secured on UK property, have paid investors an average return of 9.2 per cent per annum since launch in 2015.”

And another for its development funding added: “Help get Britain building and earn typical interest rates of 10 per cent investing in high quality property developments.”

It advertised that investors in its Innovative Finance ISA would earn seven per cent a year tax free.

Meanwhile, for borrowers considering taking out bridging finance it said: “The House Crowd has access to private capital and virtually unlimited crowdfunded monies, which can help you fund your residential or commercial property transactions, development or renovation projects, or business cash injection.”

 

P2P problems

The P2P industry has been severely hit in the last two years with several high-profile collapses including Lendy, and a tightening of regulations by the FCA.

Much of the industry has turned to institutional funding and the administrator of Lendy saying that as far as he was concerned the sector was dead.

However, Kuflink chief executive Narinder Khattoare, argued there were still some viable businesses in the P2P property sector.

The Financial Services Compensation Scheme (FSCS) does not cover funds invested in P2P lending and so investors could lose all their cash if no capital is repaid by borrowers.

In its notification at the end of last week, the FCA said: “The joint administrators’ function is generally to act in the interest of the company’s creditors as a whole, and this must be done as quickly and efficiently as is reasonably practicable.

“The joint administrators will contact all affected parties in due course. For more information please see The House Crowd’s website.”

A statement from the administrators added: “At this stage it is too early for the joint administrators to determine how much money they will be able to return to the investors, including when any payments will be made to them.

“The joint administrators are now evaluating the status of The House Crowd’s loans and working to maximise recoveries, either in the short or longer term. We will continue to update the creditors and investors with the progress that we are making.”

 

Specialist Lending Solutions contacted the FCA and the administrators for comment on the situation.

 

 

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