The House Crowd has gone bust.

DontReuseUserNamesAcrossSites

fca website ---> news/news-stories/house-crowd-limited-enters-administration

It shouldn't affect investors because the shares we own are in the companies that own the houses, not the p2p company itself. However, according to the House Crowd email, these shares will be sold, seemingly with no control from investors.

Also, having been a victim of FCA shutdowns a number of times before, I can say that the process is usually extremely slow so by the time you get your money back it could well be after 5+ years of inflation.

Dear Member

I hope you are all safe and well.

It is with regret that I have to announce that on 23rd February 2021 the Board, with the consent of the Financial Conduct Authority (“FCA”) voted to put The House Crowd Limited (“THC”) into administration and as such Frank Ofonagoro, Jeremy Woodside and Frank Wessely of Quantuma Advisory Limited were appointed Joint Administrators in the High Court on 24th February 2021.

Unfortunately, this update has taken a couple of days to send out but as you will appreciate a number of actions needed to be taken urgently to secure investors immediate interests, which obviously took priority.

As you are aware, THC has been dealing with trading difficulties for a while and this has unfortunately led to it becoming unviable.

THC’s wholly owned subsidiaries House Crowd Finance Limited, House Crowd Finance (Security Agent) and House Crowd Property Management Limited were also placed into administration on 25th February 2021.

Notwithstanding this disappointing development the Joint Administrators are focused on running an orderly wind down process that can ensure that investors recover as much of their investments as possible. Some may recover their investments in full but there are no guarantees in this regard.

Whilst very early days, the Joint Administrators are prioritising the review of the investments promoted by THC and invested in by you, so as to be able to update you on recovery prospects as quickly as possible.

The HCD projects in which you may have invested are not currently in administration and the Joint Administrators intend to work closely with the HCD management team to ensure that active developments are completed with a view to a sale, as this represents the best chance of these investments returning capital and hopefully, interest to investors.

The Bridging loans and their current strategies will all be reviewed by the Joint Administrators and managed accordingly, again with the objective of maximizing capital returns for investors.

The House Crowd Property (“HCP”) special investment vehicles are also not in administration and will continue to operate as normal.

You will understandably be concerned by all of this and the Joint Administrators are committed to providing you with prompt progress updates as they get more visibility of the situation and recovery prospects.

You are bound to have a number of questions and concerns and to this end the Joint Administrators have prepared a list of FAQs that you may find helpful. These FAQs can be accessed via THC’s website (can't post the link - blocked by this forum)

Should you have any particular questions not answered by the FAQs you can contact the Joint Administrators at thehousecrowd@quantuma.com

Please stay safe, stay alert and save lives.

Kind regards

Carl

ivormonee

There's been a history of P2P platforms that deal with illiquid assets going into administration. At least the investments themselves are protected through the ringfencing mechanism but it's just the waiting for everything to unwind that's the issue.

Thrugelmir

DontReuseUserNamesAcrossSites said:

Also, having been a victim of FCA shutdowns a number of times before, I can say that the process is usually extremely slow so by the time you get your money back it could well be after 5+ years of inflation.

Your choice of investments appears to be following a concerning pattern. 

ivormonee

Thrugelmir said:

DontReuseUserNamesAcrossSites said:

Also, having been a victim of FCA shutdowns a number of times before, I can say that the process is usually extremely slow so by the time you get your money back it could well be after 5+ years of inflation.

Your choice of investments appears to be following a concerning pattern. 

Or exceptionally bad luck! Or incredible coincidence! Or the wrath of the gods!

jimjames

ivormonee said:

There's been a history of P2P platforms that deal with illiquid assets going into administration. At least the investments themselves are protected through the ringfencing mechanism but it's just the waiting for everything to unwind that's the issue.

Let's hope that's the case unlike Blackmore where the properties were also mortgaged alongside the bond holders money so net value was zero once bank had been paid.

ivormonee

jimjames said:

ivormonee said:

There's been a history of P2P platforms that deal with illiquid assets going into administration. At least the investments themselves are protected through the ringfencing mechanism but it's just the waiting for everything to unwind that's the issue.

Let's hope that's the case unlike Blackmore where the properties were also mortgaged alongside the bond holders money so net value was zero once bank had been paid.

Oh, well that is quite a different scenario and one the OP may not want to contemplate!

I don't know what the different structures are for the various P2P platforms that deal with property. I assumed that people invest via such a platform in the form of lending, to people that borrow this money towards their mortgage. The mortgage lender, in this case the P2P platform, gets security of the properties. But because they are not the actual lender, they act as the middleperson for the investor, who is the lender. So, the security should, in theory, be ringfenced for the investor who is lending money via the platform. There would not be any bank involvment in a pure P2P scheme such as the one I understand. But if some organisations are operating a different model, or involving third parties, such as banks, then potentially there may be additional risks as a result, but I don't know.

doe808

Lasted longer than I thought it would, to be fair !

masonic

ivormonee said:

I don't know what the different structures are for the various P2P platforms that deal with property. I assumed that people invest via such a platform in the form of lending, to people that borrow this money towards their mortgage. The mortgage lender, in this case the P2P platform, gets security of the properties. But because they are not the actual lender, they act as the middleperson for the investor, who is the lender. So, the security should, in theory, be ringfenced for the investor who is lending money via the platform. There would not be any bank involvment in a pure P2P scheme such as the one I understand. But if some organisations are operating a different model, or involving third parties, such as banks, then potentially there may be additional risks as a result, but I don't know.

THC was bridging finance and development finance. Loans in this sector are quite commonly second or third charge, I don't know of THC specifically, but if so, then jimjames' scenario in which the first charge holder gets a partial recovery and those in the later charges walk away with nothing is entirely possible in some cases.

The main risk is that property developers who were dependent on follow-on finance from the platform have to abandon their plans, leaving a part completed building to fall into disrepair. Not to mention those who see their contractors vandalise the building because they haven't been paid for the work they have done. It should be noted that incidences of spontaneous combustion are also higher in properties associated with a failed P2P firm. On the bridging side, offers to buy or offer finance on properties have a tendency to evaporate as the administration process stops any progress being made.

Because of the glacially slow pace of the administration process, and the rapid accrual of fees, alongside the tendency for properties to sell for a fraction of their valuation in a fire sale, the losses will tend to be far greater when administrators are winding up a failed P2P firm. There is no FSCS protection for losses due to administrator fees as there would be when investing in shares.

metamin

According to some news outlets, the administrators are claiming, "[They said] it is not expected to have a material impact on investors."
I don't understand how this would be the case - although the properties are ringfenced in separate entities from THC, surely there's little chance that the winding down of the company within a year or so by selling assets fairly quickly via auctions etc. won't lead to a loss of potential earnings investors could have earned if they stayed in business, and/or interest or interest on interest promised, or in the worst case, capital.

justme111

ivormonee said:

jimjames said:

ivormonee said:

There's been a history of P2P platforms that deal with illiquid assets going into administration. At least the investments themselves are protected through the ringfencing mechanism but it's just the waiting for everything to unwind that's the issue.

Let's hope that's the case unlike Blackmore where the properties were also mortgaged alongside the bond holders money so net value was zero once bank had been paid.

Oh, well that is quite a different scenario and one the OP may not want to contemplate!

I don't know what the different structures are for the various P2P platforms that deal with property. I assumed that people invest via such a platform in the form of lending, to people that borrow this money towards their mortgage. The mortgage lender, in this case the P2P platform, gets security of the properties. But because they are not the actual lender, they act as the middleperson for the investor, who is the lender. So, the security should, in theory, be ringfenced for the investor who is lending money via the platform. There would not be any bank involvment in a pure P2P scheme such as the one I understand. But if some organisations are operating a different model, or involving third parties, such as banks, then potentially there may be additional risks as a result, but I don't know.

That was the idea - collapse of the platform would not not threaten capital because the lender's  money is ring fenced. Which turned out to be a fat big lie as far as I can see because every Tom d..k and harry seems to charge for wind down procedures and there is nothing else to be used for it other than investors money.
I still can not understand how FCA has allowed for it to happen when what has happened is exactly the opposite to what was said would happen but I could not be bothered to find out.

Albermarle

There is also pressure  for the administrators to keep lending money already promised or planned to the developer. As the developer actually finishing off the job is probably the best chance of the loan being paid off.