Managing risk
Lendy is a responsible property lender and we take risk mitigation, due diligence and underwriting very seriously. Investments made via Lendy place capital at risk. Lendy is not covered by the Financial Services Compensation Scheme. See Lendy's Risk Statement.
Property investment—alongside cash, bonds and shares—is one of the four most common types of investments, and none is without some risk.
At Lendy, we take managing investor risk very seriously. This is why we have one of the most experienced and specialist credit assessment teams in the industry, who ensure each investment loan has met our rigorous and robust lending criteria. We only offer investors loans to invest in that have been through our rigorous and streamlined due diligence, credit and legal checking.
Our specialist team of lending professionals has over 100 years of mortgage underwriting experience between them. They are experts in the property market and understand how to assess and manage the risks involved.
Like all other types of investment, property prices and demand for property can go up and down. It is for this reason that we would recommend that our investors diversify their investments with us between a range of loans.
This way, if one of your loans falls in value, the borrower falls behind schedule and stops paying regular interest, or we need to take formal action to recover the security, you have spread your risk across a number of loans.
You should therefore consider if you are over-invested in property. If you are you might end up in trouble when housing markets slow. To avoid this, you could diversify your portfolio by holding different kinds of investments.
We feel it is important to make you aware that with investing your capital is at risk and interest payments are not guaranteed if a loan becomes non-performing.
Our experienced business development managers carry out an extensive 'know your customer' (KYC) process when they first source a loan. Their checks include background searches into the prospective borrower, credit and anti-money laundering screenings, and, in most cases, interviews with the borrower.
After the loan has passed the first stage it is then reviewed by a member of our legal panel. The panel is made up of three Top 100 law firms; DAC Beachcroft, Shakespeares and Clarke Willmott, with all three law firms on holding a minimum of £10m professional indemnity (PI) insurance. For certain projects we also use Warner Goodman, which has £3m PI cover, and for loans secured against Scottish property Lendy uses Gillespie MacAndrew, which has £25m PI cover.
Our solicitors ensure that a legal charge is properly made against each security property, and that each of the security properties has good title. The solicitors also ensure that if a borrower grants additional security, such as guarantees and debentures, that these securities are properly executed and enforceable.
We use a number of highly rated independent firms to value security properties. Each firm will be a specialist in the region where the property is located. The firm will use a RICS registered valuer who is able to carry out a full red book valuation. They will also have significant PI cover.
For development loans we appoint an Independent Monitoring Surveyor (IMS), who will certify build costs and satisfactory progress of the development, then monitors progress of a development finance project. Drawdowns from the loan will be made based on the IMS interim reports.
We put each lending proposition under extensive scrutiny to determine its viability. This will include an analysis of the borrower's/sponsor's and/or other principal parties' experience, credit record, business plan and financial projections with particular regard to the borrower's ability to service the debt and repay the loan at maturity.
Once the full process has been completed, our Credit Committee will then consider and approve each lending opportunity before it is put to investors on the platform.