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eMoneyUnion really DOES Do P2P Homeowner Loans
Update: eMoneyUnion is now JustUs.
It appears there has been some confusion both in the press and at the financial regulator as to whether eMoneyUnion is a property lender itself or a P2P company that matches loans for individual lenders.
However, the Financial Conduct Authority has recently confirmed its legitimacy, so the eMoneyUnion homeowner loan transaction on 2nd Septenber was indeed a world first in P2P lending.
Secured P2P lending on real property is not new, nor is lending against residential property, but so far it has been residential buy-to-let property, not homeowner properties.
eMoneyUnion explains the technical differences between being a mortgage lender and being a P2P platform that can enable you to lend against property:
“A lender of FCA regulated mortgages secure their loan against a property at Land Registry with a mortgage deed. As a peer-to-peer platform, we secure the eMoneyUnion loan against a borrowers property at Land Registry with an equitable charge for first charges, and legal charge for second charges and as such neither class as legal “Mortgages”.
What's the difference?
That difference between an ordinary mortgage and an equitable charge in P2P could be significant.
eMoneyUnion said: “A restriction will be on the title in any event to protect the crowd of peer-to-peer lenders should a subsequent lender wish to lend and be secured as they cannot, without the security trustees consent, register their security.”
So eMoneyUnion can prevent further loans being taken out on the same security, much like a mortgage.
eMoneyUnion also had the following to say about the differences:
“There is a procedural difference between a mortgage charge and an equitable or legal charge, should the property be sought to realise the capital outstanding, however the loan is secured against the property in all variants.
“Whilst this is a legal and proven method of protecting a lenders interest in the property, the HM Treasury's implementation (which is currently in consultation) of the EU mortgage credit directive may well change this position so we will naturally be following these developments closely.”
But this doesn't answer a key question: can eMoneyUnion repossess as easily as a bank can take your home? (Not that it's always easy to take your home, but we're looking for the relative difference.)
Can eMoneyUnion repossess property?
Lee Birkett, founder of eMoneyUnion, is a former regulated individual who was responsible for over £5 billion of regulated consumer credit and insurance.
Lee told me that the reason for the lack of clarity on eMoneyUnion's website is because the laws on these charges are unclear with many legal decisions made in this area having been done so at the judge's discretion. Since it's P2P loans, there is even less clarity on the situation. The new regulations coming out should clarify matters.
It is because of the gaps in the existing law that the loans cannot be referred to as “mortgages”, which is why, Lee told me, eMoneyUnion just refers to as “secured loans”.
Lee explained that it is even more complicated under the bonnet than it seems. Until the new laws are in place, a subsidiary called eMoneyDirect actually funds the loans and then they're packaged for individual P2P lenders. This is largely how the other property P2P lending companies operate.
eMoneyUnion has completed nearly 90 loans. It does:
- Unsecured consumer loan sand personal guarantor loans.
- Bridging loans (a form of short-term property loan usually against BTL properties or developer properties).
- Residential property.
eMoneyUnion does first and second charge secured loans. First charge means that it is the first, primary lender and second charge means that another lender has already lent to the borrower and secured on the same property.
Interest rates and risks
eMoneyUnion has relatively little public data compared to some bigger P2P lending companies, although it lists its interests rates by borrower type and grade. Notice that you receive 4.5% for prime, unsecured borrowers versus 7% for the best secured loans, which is a very rough indicator that eMoneyUnion's loans secured against property are higher risk than the unsecured consumer loans.
There is a bad-debt provision fund. We cannot identify the total size of the fund compared to outstanding loans, although it appears to be at least a little bit above forecast bad debts. We can expect rather more details and figures next week, Lee said.
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