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March 03, 2017  

LendIt Confab to Showcase Improvement

With the marketplace-lending business on the mend, industry participants are eyeing the sector’s main-event conference as an opportunity to display continued improvements.

“LendIt USA 2017” takes place March 6-7 at the Jacob Javits Center in New York. Host LendIt already has been touting a record headcount of some 5,000 for months, up from the 3,600 people who showed up for the gathering’s 2016 edition.

One sponsor confirmed the growth, saying he expects attendance of at least 4,200.

Indeed, marketplace-lending companies that dispatched funding-oriented employees to the Structured Finance Industry Group’s “SFIG Vegas 2017” conference this week are planning to send more diverse delegations to the LendIt summit. “I think most marketplace [originators] sent their capital-markets teams to Las Vegas. But they will turn out en masse for LendIt,” one warehouse lender said.

The conference follows a series of setbacks for the marketplace-lending industry over the past year, including reports of disappointing asset performance, a document-tampering scandal at originator Lending Club and diminished demand from loan buyers. And on Feb. 27, U.S. District Court Judge Cathy Seibel in New York ruled that the closely watched case of Madden v. Midland Funding could continue, contributing to continued uncertainty over whether local usury laws might cap interest rates for marketplace loans.

But a backdrop for LendIt USA 2017 promises to be a recent series of improvements that have seen loan buyers return to the sector. On Feb. 27, for example, Prosper Marketplace agreed to sell up to $5 billion of its loans to investors including Fortress Investment unit New Residential, Jefferies, Soros Fund Management and Third Point. Those operations, in turn, secured new warehouse facilities from Credit Suisse, Deutsche Bank, Goldman Sachs and Morgan Stanley.

Industry participants also point to a $213 million securitization by Arcadia Funds as an encouraging sign. The offering, with a triple-B grade from Kroll, marks the first rated issue backed by Lending Club accounts. Marlette Funding, which retains a portion of its loans, also appears to be preparing its second securitization.

While some smaller originators have folded, meanwhile, sources describe the shakeout as largely over — with more-established shops looking at the conference as a venue to demonstrate their readiness to grow.

“At the start of last year, we saw the first headwinds for the industry, and that came as a bit of a surprise given the benign economic climate,” LendIt executive Peter Renton said. “Then you had the Lending Club debacle, and that sent things into a bit of a tailspin. A lot of platforms struggled mightily over the summer, but it’s slowly coming back.”

Renton added that if attendance this year is strong enough, he plans to lock in the Javits Center as the location for LendIt’s 2019, 2020 and 2021 conferences. He planned to do the same for 2018 — moving away from a format in which the event has alternated annually between New York and San Francisco — but wasn’t able to book the venue in time.

For that reason, the 2018 LendIt gathering will be held at the Moscone Center in San Francisco. Last year, it took place at the Marriott Marquis hotel, also in San Francisco.

Despite the bullish tone, meanwhile, some market participants continue to express skepticism. One noted that LendIt’s headcount includes college students who were invited to scope out jobs in the industry, likely without paying for admission.

Some also remain nervous over the Midland Funding case. That long-running matter revolves around whether usury laws protect credit-card borrowers when their accounts are sold. But it could set a precedent for marketplace lenders because those shops often avoid local usury controls by funneling their accounts through institutions with national bank charters.

To that end, discussions at the LendIt conference are certain to address a proposal by the Comptroller of the Currency to create so-called fintech charters that would allow marketplace lenders to avoid state-by-state licensing.