Asset Backed Alert (February 24, 2017) Original article available here (subscription required)
A new report from PeerIQ aims to illustrate the pitfalls of a lack of standardization in documenting marketplace-originated personal loans.
The New York data firm plans to release its findings at “SFIG Vegas 2017,” the big industry conference that the Structured Finance Industry Group and Information Management Network are hosting in Las Vegas next week. Among its assertions: That variations in origination practices are forcing loan and bond buyers to spend more on due-diligence reviews.
“Inconsistent data content, formatting and transmission practices increases diligence time, back-office outlays and operational risks — all of which increases costs of investors and deters new capital sources from entering,” the report says.
PeerIQ also argues that inconsistent data definitions or reporting may have contributed to instances in which asset-performance measures for marketplace-loan bonds weakened beyond permissible levels, prompting the diversion of cashflows away from junior investors.
The firm attributes the lack of standardization in part to aggressive growth efforts by numerous small originators, while noting that loan buyers, asset-backed bond investors and warehouse lenders all need the same information — often for regulatory or internal-reporting purposes. The firm’s report ties in with efforts to pitch its core service as an evaluator of marketplace-originated personal loans and mortgages.
Competitors in the space include dv01, Global Debt Registry, Orchard Platform and NewOak Capital.
Meanwhile, some large lenders have been adopting “best practices” for data organization endorsed by SFIG and the U.K.-focused Peer-to-Peer Finance Association.
In the only marketplace loan securitization currently in the market, Arcadia Funds is shopping an issue backed by accounts originated by Lending Club. The bonds carry triple-B ratings from Kroll.