spiral
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Post by spiral on Jul 29, 2014 12:09:30 GMT
Does the footnote on each page of their site: This figure is the total security held for all loans that we currently hold. It should be noted that each separate loan has specific security available only to that loan and the total security amount shown is not cross-collateralised.any longer have any significance following the switch to auto-matching? I would say yes because if that isn't made clear and loan x goes belly up and the provision fund is insufficient and the security from loan x is also insufficient it doesn't permit you access to the other securities. A lot of ifs I know but it may just happen some day.
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Post by yorkshireman on Jul 29, 2014 12:40:22 GMT
Wellesley need to clarify this point.
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spiral
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Post by spiral on Jul 29, 2014 15:17:58 GMT
Wellesley need to clarify this point. I'm not sure what you're asking them to clarify. I think the statement is clear enough. If they have 100 loans each with 100K security, they have a total of £10M security. If one of those loans goes belly up and needs to recover £70K, the only security that is applicable is the £100K tied to that loan. i.e. If on trying to realise the £70K outstanding, they only recover £50K, then that loans shortfall is not available from the other £9.9M of security and the provision fund would step in.
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webwiz
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Post by webwiz on Jul 29, 2014 19:03:06 GMT
Hmm. Before auto-matching if a loan defaulted only the investor(s) providing the funds for that loan would lose money (or need to call on the PF). There was no cross-collateralisation. Now AIUI the loss would be shared by all investors (or possibly all of a class of investors) so there is now some cross-collateralisation. Is that right?
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Post by wellesleyco on Jul 29, 2014 19:44:03 GMT
webwiz, spiral and yorkshireman. Yes as spiral mentions there is still significance in this statement. It is important to state that in the event that a borrower were to default, the security held for that loan is specific to that loan and no other security can collateralise that bad debt. If Loan X was to go into default, the Asset to which Loan X is secured against, is sold in order to recover any losses. If the money raised by the liquidation of the security does not cover the amount borrowed (which is at an average of 64% of the market value across the loan book), first Wellesley & Co loses its retained portion of that loan. If there is still an outstanding debt, then this falls on the platform lenders. The platform lenders are eligible to apply to the Provision Fund to compensate for any losses incurred. The Auto-Matching tool reduces the impact of a default to lenders so that in the event lenders were to apply to the provision fund, the diversification achieved with auto-matching would limit the downside to each individual. webwiz There is no cross-collateralisation.
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elgerod
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Post by elgerod on Sept 9, 2014 11:41:25 GMT
I have a number of queries about the "Auto-Matching" system. I realise that it is an improvement on what there was before but, nonetheless, I am puzzled by several points:
1) as mentioned by several comments above, it seems that our lending is matched to many more loans than Wellesley actually has. I have several investments that are supposedly matched to over 150 loans but Wellesley only has 73 loans. In some cases, one investment is matched to the same loan at least 5 times. So to say that my investment is matched to 150 loans is somewhat misleading. Why can't the Auto-Matching tool aggregate the loans to which we are matched and show the true picture?
2) I made several investments more than 2 weeks ago, so these investments have now been through two Auto-Matching processes on Fridays. To quote from the Wellesley website, Auto-Matching allows lenders "to have the best diversification at that present moment in time, but also an improved diversification as the Wellesley loan book grows". I am therefore puzzled that each of these investments (for £3k) is matched to a loan for more than £1,900 - i.e. more than 63% of the investment is with one Wellesley loan. This can hardly be the "best diversification".
3) Although Auto-Matching runs on Fridays, after which my investments are shown as 100% matched, this changes in subsequent days to something less than 100%, for example, 97.36%. This usually means that some of the loans to which my investments were matched have 'dropped out'. Why should this be? Have the loans been paid off?
4) Following on from point 3), if the matching can change at any time, how can we be certain as to which loans we are participating in? This surely has implications if a borrower fails to pay - is there a contract between the investor and the borrower? And if there is a contract, how can it be allowed to change on a weekly, sometimes daily, basis?
I look forward to the comments from others and from Wellesley, hopefully with some reassurances.
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Post by wellesleyco on Sept 11, 2014 10:04:49 GMT
Good Morning elgerodIn response to your questions, we had a slight technical issue this week when running the auto-matching (which runs on a Sunday), which has been fixed. We re-run the system on Tuesday afternoon and everything is working properly now. Furthermore, we have made sure that this should not happen in the future. On point 1, there are some loans that are drawn down in multiple stages, and therefore there are multiple allocations for the same loan number. On point 3, the Auto-matching is done on Sunday, not Friday. Point 4. We are able to do the auto-matching due to our business model. We make the loans in the first instance and through the legal process of assignment, we are able to re-assign loan parts to lenders on an ongoing basis and the legal reconciliation and validity of this is done by Wellesley & Co. There is not a written contract as such and therefore it is allowed to change as it does. Please do come back to us if you have any further questions.
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spiral
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Post by spiral on Sept 11, 2014 12:03:02 GMT
Would I be right in assuming then that after the Sunday matching run, evrybody will have the same proportion of their funds in any given loan (including multiple drawdowns) or would this differ depending on their chosen market(s)? And what specific point in elgerod's post are you implying was caused by a technical glitch?
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elgerod
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Post by elgerod on Sept 12, 2014 9:41:24 GMT
Thank you Wellesleyco for your responses and clarification. I did notice that the matching on my investments changed dramatically within 24 hours of my post and thought it was not simply a coincidence.
Regarding spiral's second query, I presume the technical glitch was with regard to my point 2). Following Tuesday's re-run, the 63% exposure to a single loan has disappeared; the greatest percentage is now about 14% (no.552).
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shimself
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Post by shimself on Sept 15, 2014 12:48:48 GMT
Following the above, my investment summmary for a particular loan says 109 loans, but in fact it's only across 66 loans. Shouldn't you say 66 loans? Is my diversification maximised? Are loans 552, then 543 and 556 the largest (they are the largest chunks in my loan list),
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elgerod
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Post by elgerod on Sept 16, 2014 12:16:32 GMT
Shimself - Your first sentence is what I was trying to say in my point 1) and Wellesleyco's response was "there are some loans that are drawn down in multiple stages, and therefore there are multiple allocations for the same loan number".
To me this is somewhat misleading from a risk point of view - suggesting that multiple allocations for the same loan number are separate loans - and I agree it would be better to state the actual number of loans to which we are exposed, rather than the total number of allocations. I'm sure Wellesleyco will respond further and maybe they can modify how this is presented.
Regarding your last sentence, in my case yes, 552 is the largest (about 14% of my total investments), followed by 556 (5.3%), then 304 and 543 (4.8%), and 465 and 569 (4.5%). (This is spread across various investment periods and maturity dates.)
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