I’m starting this thread in response to the recent bankruptcy filing of Peer Street. Several Peer Street investors seem to be on bigger pockets, so I wanted to get us all on one thread, if possible to share resources and information, make sure we comply with deadlines in the BK process, etc.
One date we should all be aware of currently is the creditor call scheduled for August 2. I plan to be on that call and would be happy to provide a summary here.
I’m starting this thread in response to the recent bankruptcy filing of Peer Street. Several Peer Street investors seem to be on bigger pockets, so I wanted to get us all on one thread, if possible to share resources and information, make sure we comply with deadlines in the BK process, etc.
One date we should all be aware of currently is the creditor call scheduled for August 2. I plan to be on that call and would be happy to provide a summary here.
This is a great place for people to discuss this, as a lender but not someone involved in this mess, I would strongly advise every person seek counsel opinion ASAP on what they need to do. For example there are filings by Peerstreet already that objections are due by July 11th. Do those pertain to you, no idea but I would not be sitting around waiting and I would get an attorney involved.
I’m starting this thread in response to the recent bankruptcy filing of Peer Street. Several Peer Street investors seem to be on bigger pockets, so I wanted to get us all on one thread, if possible to share resources and information, make sure we comply with deadlines in the BK process, etc.
One date we should all be aware of currently is the creditor call scheduled for August 2. I plan to be on that call and would be happy to provide a summary here.
This is a great place for people to discuss this, as a lender but not someone involved in this mess, I would strongly advise every person seek counsel opinion ASAP on what they need to do. For example there are filings by Peerstreet already that objections are due by July 11th. Do those pertain to you, no idea but I would not be sitting around waiting and I would get an attorney involved.
What type of lawyer should we look for? Is there someone that already is representing the creditors as a group, or we need individual lawyers? Say I want to find a lawyer for this situation, what type of lawyer do I google, where do I begin?
What sort of objections are due by 11 July, what do we need to do by then?
There's been talk of a group attorney on the reddit group chat, but nothing offical is setup yet.
Thank you Rob. If something comes up, can you please cross-post here as well? Some people are suggesting that it's best to be prompt. I personally don't know, but would like to be as informed as possible. Thanks in advance!
Thanks for starting this thread. Anyone have an experienced attorney in mind that is reasonably priced?
I’m in the same boat, looking for a lawyer familiar with this matter. But perhaps more importantly: what do we do with the lawyer? Is it about filing proof of claim, or a bigger step against PeerStreet, that perhaps we should do as a group?
Good question. I'll reach out to a real estate attorney that I know on Monday. I'll report back what he says. Please do the same, if you or anyone has any insight or info
Good question. I'll reach out to a real estate attorney that I know on Monday. I'll report back what he says. Please do the same, if you or anyone has any insight or info
Thanks
Thanks Adam. I spoke to someone on Friday. What I was advised was: - wait until 2 August meeting, there's no deadline - file proof of claim afterwards
Some lawyers offer to attend the meeting for you, but that seemed kind of expensive, because they wouldn't agree for me to share the cost with another client.
If you learn something different, or any new insights, please share here. My current understanding is that there's no rush until 2 August.
@Viktor S. Still waiting on the attorney to get back to me. I just shot him out another follow up email, so I suspect tomorrow sometime I should hear something.
I'd like to suggest that you defend the following idea: for unsecured creditors, especially the ones invested in mortgage notes, increasing the fee used to service the loan, in order to make it possible to continue servicing the loan to its completion, rather than selling it at a discount, will yield a significantly better outcome for us.
What seems to have led PeerStreet to their demise is that they saw their revenue drop while their cost not dropping enough (and weren't able to secure more funding, possibly thankfully for us unsecured creditors). This is because their fees per loan were actually kind of small: 1-2.5% IIRC. This was good for us investors as we got more of the loan's interest.
But now, we're faced with the possibility that instead of servicing loans to their completion and getting our capital back, PS might choose to sell the loans for steep discounts.
All these loans (or most?) had at least 20% cushion between the loan value and the collateral, they should be relatively safe to service to completion, and that's the reason why we all chose to invest in this. If instead of selling the loan, PS used let's say even 100% of the loan's interest payments towards servicing it to completion, the worst would be we'd get ~100% of the capital back, and a 0% return. This would be WAY better than getting say 30-50% of the capital back, meaning a -50% to -70% return.
That's the whole point of the "bankruptcy remote" originally: that in the worst-case scenario, while winding down or after winding down the business, loans would be services to their completion and most investor's capital would be recovered either by honest borrowers paying off their loans or by foreclosing on the properties and getting the capital back thanks to the 20-30% LTV cushion.
By stating that they want to sell the loans portfolio PeerStreet is essentially completely breaking the promise of the bankruptcy-remote structure. It would make the bankruptcy-remote structure totally useless in fact, and it would make having invested in collateral-backed notes totally useless. We all invested based on the fact that because there was a collateral, there was a way to get most of the capital back in case of failure. We should not let the bankruptcy court or PeerStreet's lawyers screw us over by selling the loans. Most loans have interest rates still not too far from traditional mortgages. And all loans were at most 24 months. So that means all performing-til-the-end loans would return capital within 24mo, and the other within that time frame + foreclosure time. That's not that long of a time to make investors whole, there is absolutely no need to rush selling the portfolio of loans at a steep discount, except for PeerStreet's exec team to be off the hook and done.
Gilbert, AZ · Member since 2016 · 14 posts · 8 votes
3y
By stating that they want to sell the loans portfolio PeerStreet is essentially completely breaking the promise of the bankruptcy-remote structure. It would make the bankruptcy-remote structure totally useless in fact, and it would make having invested in collateral-backed notes totally useless. We all invested based on the fact that because there was a collateral, there was a way to get most of the capital back in case of failure.
Agree 100%...Peer Street Funding LLC is a special purpose vehicle separate from Peer Street, the corporate entity with the website. When you invest in a loan, you purchase a note from Peer Street Funding LLC, which in turn uses that money to acquire the hard-money loan from the loan originator (i.e., the original entity that funded the underlying investment). The relationship is explained in the Private Placement Memorandum.
What happens in court will inform the whole industry of crowdfunding...lets hope they follow their word and what was promised in the agreements.
If you are just an equity investor in one of their companies, you don’t file a proof of claim. They will notify you once the re-org plan has been adopted and what your remaining position is. Most equity holders are either wiped out or given a fraction of stock in the re-organized company. It’s usually not very pretty.
If you want to consult with a bankruptcy pro (he charges for the consult), you can reach out to Paul Orshan. I would only do so if you are a creditor (they owe you money from a loan or service you provided), and he can walk you through the entire process and how to participate in the 341 meeting of creditors etc.
Sorry I can’t be of more help. It’s a pretty specialized area of law."
Investor · VA · Member since 2015 · 21k+ posts · 19k+ votes
3y
@Viktor S.
Few comments on this as someone in the business and have bought loans that were originated by ps funding
1. Not all loans are performing
2. Servicing a loan and managing a loan are two different things, if a loan goes non performing the servicer will not decide on and manage a foreclosure process. Whoever does that collects fees as well.
3. Many of these loans do not have 20% equity coverage. Many of the loans we saw were rehab loans and underwriting on them was poor with overestimated as is and ARV values.
4. Since they filed BK it’s no longer peerstreets decision as it’s up to the trustee on what to do and the trustee is gonna want their money and most likely liquidate this in an orderly fashion
Investor · Clairemont, CA · Member since 2011 · 3k+ posts · 2k+ votes
3y
For those looking for a BK atty, I'll second Tony Sottile with Sottile and Barile. He assisted on a 2nd position BK a couple years ago and he is knowledgeable, helpful and for my needs very cost effective. I'd absolutely reach out for an idea of costs and process.
Few comments on this as someone in the business and have bought loans that were originated by ps funding
1. Not all loans are performing
2. Servicing a loan and managing a loan are two different things, if a loan goes non performing the servicer will not decide on and manage a foreclosure process. Whoever does that collects fees as well.
3. Many of these loans do not have 20% equity coverage. Many of the loans we saw were rehab loans and underwriting on them was poor with overestimated as is and ARV values.
4. Since they filed BK it’s no longer peerstreets decision as it’s up to the trustee on what to do and the trustee is gonna want their money and most likely liquidate this in an orderly fashion
Are you suggesting they will likely liquidate fast and at a loss?
That stuff was not my idea, I just copy-pasted the whole thing. But thanks for the information!
Another list of creditors was filed—1000's creditors. Over 300+ pages of creditors. WOW!! This is the second list. I would suggest watching every filing. Check out the Reddit link Viktor suggested. https://www.reddit.com/r/Peers...
