Risk: The Borrower does not repay the loan

Mitigation: We assess the ability of each Borrower to repay the loan via their “repayment strategy”. The most common repayment strategies are “re-finance” or “sale of the security”. We analyse all exit plans. If the borrower does not repay the loan, we have the ability to repossess the security and sell it in order to recover loan.

Warning: Your capital is at Risk. Recovery in full is not guaranteed. Repayment in full is not guaranteed. Payment of interest is not guaranteed. Your ability to re-sell the loan is not guaranteed.

Risk: The market/valuation of the Property may fall.

This means that if the borrower does not repay and we are forced to repossess and sell the property, the property may not be worth as much as the initial valuation or it may be in negative equity and you may not receive all your capital or interest back.

Mitigation: We build in a cushion between the loan amount and the valuation of the property. We look at the value of the relevant property and set the Loan at a level which does not exceed a certain percentage of this value e.g 70% loan to value on certain residential properties. This provides a cushion for a potential down fall in the valuation or property market. Each LTV % varies depending on the asset type and location.

Warning: Your capital is at Risk. Recovery in full is not guaranteed. Repayment in full is not guaranteed. Payment of interest is not guaranteed. Your ability to re-sell the loan is not guaranteed.

Risk: The Valuation report was negligent or fraudulent

This means that if the borrower does not repay and we are forced to repossess and sell the property, the property may not be worth as much as the initial valuation and you may not receive all your capital or interest back.

Mitigation: We build in a cushion between the loan amount and the valuation of the property. We look at the value of the relevant property and set the Loan at a level which does not exceed a certain percentage of this value e.g 70% loan to value. This provides a cushion for a potential down fall in the valuation. Each LTV % varies depending on the asset type and location. In addition, where a valuation is negligent, and that negligence caused loss, then we can make a claim against the Surveyors indemnity policy to recover any capital or interest loss. In order to mitigate valuer fraud, we only use Surveyors that use Royal Institute of Chartered Surveyors (RICS), and that are local to area and, as much as possible, on our valuation panel. *For more information see our Global Lender Provisions.

Warning: Your capital is at Risk. Recovery in full is not guaranteed. Repayment in full is not guaranteed. Payment of interest is not guaranteed. Your ability to re-sell the loan is not guaranteed.

Risk: A borrower makes it difficult to repossess or sell the property

This means that it may take longer to return your capital and interest.

Mitigation: We have extensive knowledge of recovering funds and repossessing properties. To date, we have never failed to take possession of a property. The life cycle of a repossession may take a minimum of 3 months, but sometimes on rare occasions, it can take up to 2 years. *For more information on recovery time see our statistics page.

Warning: Your capital is at Risk. Recovery in full is not guaranteed. Repayment in full is not guaranteed. Payment of interest is not guaranteed. Your ability to re-sell the loan is not guaranteed.

Risk: A Borrower, provide false and/or, misleading information or commits fraud.

This means that it may take longer to return your capital and interest, and/or your capital may be at risk.

Mitigation: We independently verify as much of the information as possible via 3rd parties. For example; if the Borrower states their property is worth £300,000, we would always instruct an independent RICS surveyor, often from our panel, to value the property. If the borrower states that they have a mortgage of £150,000 over the property, we would contact the mortgage company to confirm the level of the mortgage and its current status. The list and checks that we make on each deal are extensive and can not be written here for commercial sensitivities. Please remember that our ultimate safety net is the Security. Therefore, in reality, if the borrower commits mortgage fraud, we still have the Security to fall back on to recover the loan capital and or interest.

Warning: Your capital is at Risk. Recovery in full is not guaranteed. Repayment in full is not guaranteed. Payment of interest is not guaranteed. Your ability to re-sell the loan is not guaranteed.

Risk: A borrower is not who he says he is or commits identity fraud.

Mitigation: We have extensive anti-fraud measures that minimise and reduce the risk of identity fraud. These range from technological checks to ensure that money is paid into the bank account of the named borrower. We also only send funds to the borrowers solicitor who undertake to pay the money to the titled borrower. This is so that if the solicitor of the borrower has been duped by identity fraud, they should be liable to us for not paying it to the correct borrower.

Warning: Your capital is at Risk. Recovery in full is not guaranteed. Repayment in full is not guaranteed. Payment of interest is not guaranteed. Your ability to re-sell the loan is not guaranteed.

Risk: A borrower states that they did not make the loan, or the loan was made under duress or they did not understand the loan.

This means that it may take longer to return your capital and interest, and/or your capital may be at risk.

Mitigation: The borrower must receive independent legal advice and their solicitor makes a legal undertaking to us that they have made these checks. The solicitor must speak to the borrower and explain the loan agreement and the consequences of not repaying the loan. This is done so that the borrower can not state they were unaware of what they were entering into and unsure of the potential consequences if they do not repay the loan. The solicitor also witnesses their signature of the loan and mortgage to ensure that the right borrower signs the contracts.

Warning: Your capital is at Risk. Recovery in full is not guaranteed. Repayment in full is not guaranteed. Payment of interest is not guaranteed. Your ability to re-sell the loan is not guaranteed.

Risk: A borrower contests the validity or regulatory nature of the loan.

This may put your loan / capital at risk and or make it longer to return your capital or interest.

Mitigation: Our solicitors and our underwriting team have extensive knowledge of lending and the fact that this kind of lending remains outside of regulation.

Warning: Your capital is at Risk. Recovery in full is not guaranteed. Repayment in full is not guaranteed. Payment of interest is not guaranteed. Your ability to re-sell the loan is not guaranteed.

Risk: A solicitor or other advisor of the borrower provide false and/or, misleading information or commits fraud.

A solicitor or other advisor of the borrower provide false and/or, misleading information or commits fraud.

Mitigation: We always ensure that the solicitors has 3 or more SRA approved solicitors.

Warning: Your capital is at Risk. Recovery in full is not guaranteed. Repayment in full is not guaranteed. Payment of interest is not guaranteed. Your ability to re-sell the loan is not guaranteed.

Risk: It is not possible to register the Legal Mortgage at the Land Registry or a solicitor fails in its undertaking to do so or there is a problem with the title to the Property.

This may put your loan / capital at risk and or make it longer to return your capital or interest.

Mitigation: Our solicitors make extensive checks on the Title of the Security. For more information see “Underwriting, Fraud and Valuations”. We perform extensive due diligence on the borrowers solicitor, ensuring that they have appropriate indemnity cover and at least three SRA registered partners. If the solicitors provided negligent or misleading information and this caused loss, then we have recourse to the Solicitors indemnity policy.

Warning: Your capital is at Risk. Recovery in full is not guaranteed. Repayment in full is not guaranteed. Payment of interest is not guaranteed. Your ability to re-sell the loan is not guaranteed.

Risk: Banking fraud or internal theft in respect of the client trust account or any cyber-fraud.

This may put your loan / capital at risk and or make it longer to return your capital or interest.

Mitigation: We have professional negligence cover that extends to cyber fraud/theft and employee fraud theft. This is subject to the insurance policy T's & C's.

Warning: Your capital is at Risk. Recovery in full is not guaranteed. Repayment in full is not guaranteed. Payment of interest is not guaranteed. Your ability to re-sell the loan is not guaranteed.

Risk: A PI insurance policy does not pay out or does not extend to the full loss.

This may put your loan / capital at risk and or make it longer to return your capital or interest.

Mitigation: We review our processes, procedures and policies regularly. Past performance is not a reliable indicator of future performance.

Warning: Your capital is at Risk. Recovery in full is not guaranteed. Repayment in full is not guaranteed. Payment of interest is not guaranteed. Your ability to re-sell the loan is not guaranteed.

Risk: SoMo or Social Money become insolvent

This may put your loan / capital at risk and or make it longer to return your capital or interest.

Mitigation: SoMo holds the securities over loans to all borrowers in a trust on behalf of you. Should SoMo stop trading or become insolvent, then these security interests are ring fenced from SoMo insolvency. The liquidator or administrator would be obliged to recognise the trust arrangements and use the property in trust to return capital and interest to the relevant Lenders (and not apply these assets towards SoMo’s creditors generally).

Warning: Your capital is at Risk. Recovery in full is not guaranteed. Repayment in full is not guaranteed. Payment of interest is not guaranteed. Your ability to re-sell the loan is not guaranteed.

Risk: Any unforeseen circumstance which may affect the Security (e.g fire or water damage) the Borrower (e.g death or bankruptcy) or the Property

This may put your loan / capital at risk and or make it longer to return your capital or interest.

Mitigation: We ensure that all our Securities have a valid fire / damage insurance policy. Should the borrower go bankrupt or pass away, then we can still seek to recover the loan capital and interest from the the security.

Warning: Your capital is at Risk. Recovery in full is not guaranteed. Repayment in full is not guaranteed. Payment of interest is not guaranteed. Your ability to re-sell the loan is not guaranteed.

Platform failure or technological failure

This may put your loan / capital at risk and or make it longer to return your capital or interest.

Mitigation: We make daily back ups of the platform, the site, the loan book and your accounts. This is so that if there was a technological failure, we would be able to re-install the site from the last back up.

Warning: Your capital is at Risk. Recovery in full is not guaranteed. Repayment in full is not guaranteed. Payment of interest is not guaranteed. Your ability to re-sell the loan is not guaranteed.

Risk: 2nd charge loans

This may put your loan / capital at risk and or make it longer to return your capital or interest.

Mitigation: A 2nd charge lender has the same legal rights as the 1st charge lender and can repossess the Security if the loan is in default. Provided that 1st charge lenders gets paid back first then there is not a lot that they can do to stop that process. Ergo, the only significant difference is that a 1st charge lender would get paid their loan back first. ‘We make extensive checks as to the monetary position of the 1st charge loan, and where practicable, we gain the 1st charge lenders consent to a Deed of Postponement so that the 1st charge lender cannot increase their loan amount. We also ensure that Loans are sized in consideration of any prior loans to fit in with our Loan To Value cushion. There are many other steps that we check to lend safer via 2nd charge loans. However, due to commercial sensitivities we are not willing to publish our “know-how” online. If you would like more information, please contact us.

Warning: Your capital is at Risk. Recovery in full is not guaranteed. Repayment in full is not guaranteed. Payment of interest is not guaranteed. Your ability to re-sell the loan is not guaranteed.

Risk: You can not sell your loan on the Resell Market

This may put your loan / capital at risk and or make it longer to return your capital or interest.

We offer the ability for you to re-sell your loan and the average time to sell a loan is 1hr 43 minutes (in normal market conditions). However, you should not rely on this mechanism to retrieve your capital. You should at all times be prepared for your loan to follow the performance of the underlying loan with the borrower.

Warning: Your capital is at Risk. Recovery in full is not guaranteed. Repayment in full is not guaranteed. Payment of interest is not guaranteed. Your ability to re-sell the loan is not guaranteed.

 

The above RISKS are not exhaustive. There could be other risks not stated above or that are unforeseen and beyond our control. Even though we have not lost any capital nor any interest in any of our loans (as of 01/06/20), please remember that by lending, your capital and interest is at risk of loss and it is not guaranteed. Past performance is not an indicator of future performance.

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