The court case for Ezubao has begun in Beijing; Ezubao and affiliated companies will be on trial for fraudulent investment of approximately 60 billion yuan ($8.6 billion); Ezubao's owners, Yucheng Holdings and Yucheng Global, were highly involved with the investments and will be on trial along with numerous other people associated with the fraudulent investment activities. Source
News Roundup
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According to American Banker, CAN Capital has laid off employees; this is following the news earlier this month of the company putting the chief executive officer and other executives on leave; according to an email from the company, "While this is a difficult decision, we believe it is necessary to position ourselves for long-term success."; documents from state officials in Georgia showed 136 layoffs in the Kennesaw, Georgia office while a source stated layoffs totaled 250 people, including all staff in Costa Rica; according to the source, layoffs were at least half of the company's total workforce. Source
The SEC Small Business Advocate Act of 2016 (HR3784) was signed into law; the law will add a new office within the Securities and Exchange Commission (SEC) for small business advocacy; the small business advocacy office will oversee and support regulation and investment activities for small businesses and small business investors; the new law will also establish a small business capital formation advisory committee that will advise the SEC on small business market activity. Source
Non-bank lenders like OnDeck, CAN Capital and Kabbage have originated billions in small business loans, but some fear they might be repeating the mistakes made by banks with subprime mortgages; recent overdue payments on securitizations are raising questions about predatory lending and marketing tactics; the small business market is significantly smaller than the mortgage market, and so the risk of another global financial crisis is small. Source
Money360 is a marketplace lending platform focused on commercial real estate; Evan Gentry of Money360 provides insight on the firm in a Lend Academy podcast; the firm offers loans of $1 million to $15 million for commercial real estate properties; it has two primary products, shorter term bridge loans which are mainly funded by high net worth investors, family offices, hedge funds and institutional investors and then permanent longer term loans funded by banks and credit unions; the company has also launched an open-end fund which allows investors to invest in a portfolio of the company's commercial real estate loans; it has plans for continued growth in 2017 with the goal of $1 billion in annual originations over the next few years. Source
Estimated return on loan production in November 2016 was 6.58%, which is down from the previous three months; Prosper attributes its revised pricing and credit market trends overall to the month's weaker performance; the average FICO score in November was 714.2 which is approximately 10 points above the FICO scores in 2015 vintages; cumulative charge-offs are trending higher in 2015 and 2016 than 2013 and 2014; higher pricing is also a factor potentially affecting prepayment rates which are higher for loans originated in 2016. Source
Ranger Direct Lending Fund raised close to $20 million of the $50 million target it set out to raise through a placing of C shares; in 2015 the fund was looking to raise $169 million but pulled the offering and then raised $17 million; though the fundraise fell short, Numis Securities anticipated the Fund would have issues as the shares are trading at 5% discount. Source
Phill Rosen spoke with Crowdfund Insider following the news last week of the company surpassing $1.5 billion in loan requests; according to Rosen, besides debt consolidation, weddings, auto and home improvement are the most popular categories for loans; average loan size is $10,551; Avant is the most popular platform by take rate followed by both Lending Club and Ascend who have high take rates according to Rosen; EVEN has seen a significant increase in demand since September which may be regular seasonal demand; for 2017, Rosen sees more consolidation for the space, followed by more growth. Source
After a break in new investor inflows, Zopa has reopened to investors; the firm closed its platform to new investments at the beginning of December; cited an imbalance in borrower versus investor demand; firm is now accepting new investments with a 4.2 million British pound ($5.24 million) platform capacity. Source
Lending Club's chief technology officer, John MacIlwaine, has resigned and will pursue another opportunity; the firm will conduct a search for a new chief technology officer and has appointed the senior vice president for technology to oversee the business; MacIlwaine had been with Lending Club since 2012 and has extensive experience in executive management roles overseeing financial technology platforms. Source