09dolphin
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Post by 09dolphin on Feb 6, 2018 6:44:05 GMT
I have noticed in the past 2 months that there have been several loans put up for an investment in excess of 70% LTV.
It does cause me some concern that FS are lowering their standards and are willing to take increased risks with lenders money in order to keep up a flow of loans - I can't think of any other motivation except some of these loans are renewals with increased borrowing - which rings serious alarm bells for me. Having done DD into some loans over 70% I must admit to having serious concerns. If the interest rate was 16% to 20% it may be worth the risk as the probability of a recovery in the event of the possible default situation is poor and frankly is diabolical taking account the past history of this company's recovery of defaulted loans over the past 2 years.
When you take into account the "optimistic" LTV FS usually use I have to ask why FS are lowering their standards and accepting loans in excess of 70%.
I would appreciate other forumites comments as I really have difficulty understanding.
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sqh
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Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Feb 6, 2018 7:39:39 GMT
I have noticed in the past 2 months that there have been several loans put up for an investment in excess of 70% LTV.
It does cause me some concern that FS are lowering their standards and are willing to take increased risks with lenders money in order to keep up a flow of loans - I can't think of any other motivation except some of these loans are renewals with increased borrowing - which rings serious alarm bells for me. Having done DD into some loans over 70% I must admit to having serious concerns. If the interest rate was 16% to 20% it may be worth the risk as the probability of a recovery in the event of the possible default situation is poor and frankly is diabolical taking account the past history of this company's recovery of defaulted loans over the past 2 years.
When you take into account the "optimistic" LTV FS usually use I have to ask why FS are lowering their standards and accepting loans in excess of 70%.
I would appreciate other forumites comments as I really have difficulty understanding.
Yesterday's offering at 72% looks safe. All 5 properties are complete, 2 are sold and the others are sold STC, so the valuation is not in doubt.
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r00lish67
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Post by r00lish67 on Feb 6, 2018 7:48:07 GMT
Yesterday's offering at 72% looks safe. All 5 properties are complete, 2 are sold and the others are sold STC, so the valuation is not in doubt. Indeed. Meanwhile, one of the least popular loans on the SM of late (B*** Cottage) has an LTV of 'only' 34%, and some of the Lytham tranches, 17%. The point is that the LTV value FS attribute are notional. A figment of their creative flair at the time. I don't think we should be put off by FS declaring an LTV of 70%+, any more than I think we should dive in at 34%.
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09dolphin
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Post by 09dolphin on Feb 6, 2018 8:50:30 GMT
Yesterday's offering at 72% looks safe. All 5 properties are complete, 2 are sold and the others are sold STC, so the valuation is not in doubt. Indeed. Meanwhile, one of the least popular loans on the SM of late (B*** Cottage) has an LTV of 'only' 34%, and some of the Lytham tranches, 17%. The point is that the LTV value FS attribute are notional. A figment of their creative flair at the time. I don't think we should be put off by FS declaring an LTV of 70%+, any more than I think we should dive in at 34%. I sort of agree that FS use "notional" values which are designed to mislead as, by definition, notional values are meaningless.
If FS are using "notional" values for their LTV I think any and all investors should be exceedingly cautious and probably choose to invest elsewhere as it's a basically dishonest measure of value.
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r00lish67
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Post by r00lish67 on Feb 6, 2018 8:56:19 GMT
Indeed. Meanwhile, one of the least popular loans on the SM of late (B*** Cottage) has an LTV of 'only' 34%, and some of the Lytham tranches, 17%. The point is that the LTV value FS attribute are notional. A figment of their creative flair at the time. I don't think we should be put off by FS declaring an LTV of 70%+, any more than I think we should dive in at 34%. I sort of agree that FS use "notional" values which are designed to mislead as, by definition, notional values are meaningless. However I assume then that you agree that all the money advanced on the Whitehaven debacle fits in with the LTV of not exceeding 65% or 70% at any time. Yet this "notional" LTV did contribute to investors decision to invest in further loans. I can't believe anyone would have invested knowing that only the first loan had any chance whatsoever of being repaid and the further investors were being held out to dry on all the other additional loans.
If FS are using "notional" values for their LTV I think any and all investors should be exceedingly cautious.
This has been discussed in a few threads over the last few days, for example see yangmills ' neat summary: p2pindependentforum.com/post/243597In short, yes you should be exceedingly cautious, and it's not just FS by any means. Re: Whitehaven, IMV that's something entirely different. It's one thing asking lenders to suspend their disbelief by accepting ambitious assumptions to arrive at 70% LTV, quite another to ask lenders to believe outright falsehoods to arrive at the same.
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r1200gs
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Post by r1200gs on Feb 6, 2018 8:56:47 GMT
I have noticed in the past 2 months that there have been several loans put up for an investment in excess of 70% LTV.
It does cause me some concern that FS are lowering their standards and are willing to take increased risks with lenders money in order to keep up a flow of loans - I can't think of any other motivation except some of these loans are renewals with increased borrowing - which rings serious alarm bells for me. Having done DD into some loans over 70% I must admit to having serious concerns. If the interest rate was 16% to 20% it may be worth the risk as the probability of a recovery in the event of the possible default situation is poor and frankly is diabolical taking account the past history of this company's recovery of defaulted loans over the past 2 years.
When you take into account the "optimistic" LTV FS usually use I have to ask why FS are lowering their standards and accepting loans in excess of 70%.
I would appreciate other forumites comments as I really have difficulty understanding.
Yesterday's offering at 72% looks safe. All 5 properties are complete, 2 are sold and the others are sold STC, so the valuation is not in doubt. Indeed, better higher known LTV than some best guess. In fact I missed that one .Off to grab a slice.
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r00lish67
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Post by r00lish67 on Feb 6, 2018 9:01:59 GMT
Yesterday's offering at 72% looks safe. All 5 properties are complete, 2 are sold and the others are sold STC, so the valuation is not in doubt. Indeed, better higher known LTV than some best guess. In fact I missed that one .Off to grab a slice. It'll probably be fine, but I'd personally be rather more interested in some of the 5th tranche of the first facility on the SM at par (at time of writing) @ 12% interest for 56% LTV. IMV, FS offer drastically too little premium for what are (generally) very risky lower ranking facilities. Edit: Or there's the 6th tranche renewal of first facility up at 11am this morning if you prefer your loans freshly laid without accrued interest.
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r1200gs
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Post by r1200gs on Feb 6, 2018 9:17:00 GMT
Indeed, better higher known LTV than some best guess. In fact I missed that one .Off to grab a slice. It'll probably be fine, but I'd personally be rather more interested in some of the 5th tranche of the first facility on the SM at par (at time of writing) @ 12% interest for 56% LTV. IMV, FS offer drastically too little premium for what are (generally) very risky lower ranking facilities. I'm still a little uncertain of the tax consequences of the FS secondary market and I have a complex tax situation to sort out this year after returning to UK domicile, one that's going to need an accountant. For that reason I didn't bother with the SM as I have enough on my plate. Am I making a mistake? Is it just a case of taking on the sellers tax liabilities and is that easy to report? Anyway, we have five houses here all pretty much finished and sold and a pretty much known debt. That's a whole lot better than, say, a field that might one day contain a mansion or a one day to be filled hole in the wall, eh? 
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r00lish67
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Post by r00lish67 on Feb 6, 2018 9:26:03 GMT
It'll probably be fine, but I'd personally be rather more interested in some of the 5th tranche of the first facility on the SM at par (at time of writing) @ 12% interest for 56% LTV. IMV, FS offer drastically too little premium for what are (generally) very risky lower ranking facilities. I'm still a little uncertain of the tax consequences of the FS secondary market and I have a complex tax situation to sort out this year after returning to UK domicile, one that's going to need an accountant. For that reason I didn't bother with the SM as I have enough on my plate. Am I making a mistake? Is it just a case of taking on the sellers tax liabilities and is that easy to report? Anyway, we have five houses here all pretty much finished and sold and a pretty much known debt. That's a whole lot better than, say, a field that might one day contain a mansion or a one day to be filled hole in the wall, eh? It certainly looks a better bet to me than most, I agree. But why take the small risk of a total loss of capital for the sake of 1 extra percentage point? Re: the SM, presuming you then hold the loan until the point it pays out interest, then yes you'd take on the potential tax liability for all of the interest it accrues in the meantime, depending on your circumstances. That obviously wouldn't apply if held within the FS ISA. Whether you should buy on SM or not in your personal circumstances is entirely up to you. Works for me, but I'm a low/no tax payer. Btw, see my edit from post above - there's another tranche of the first facility up for renewal at 11am this morning if you prefer not buy on SM.
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r1200gs
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Post by r1200gs on Feb 6, 2018 9:42:46 GMT
I'm still a little uncertain of the tax consequences of the FS secondary market and I have a complex tax situation to sort out this year after returning to UK domicile, one that's going to need an accountant. For that reason I didn't bother with the SM as I have enough on my plate. Am I making a mistake? Is it just a case of taking on the sellers tax liabilities and is that easy to report? Anyway, we have five houses here all pretty much finished and sold and a pretty much known debt. That's a whole lot better than, say, a field that might one day contain a mansion or a one day to be filled hole in the wall, eh?
Re: the SM, presuming you then hold the loan until the point it pays out interest, then yes you'd take on the potential tax liability for all of the interest it accrues in the meantime, depending on your circumstances. That obviously wouldn't apply if held within the FS ISA. Whether you should buy on SM or not in your personal circumstances is entirely up to you. Works for me, but I'm a low/no tax payer. Btw, see my edit from post above - there's another tranche of the first facility up for renewal at 11am this morning if you prefer not buy on SM. Yes, good point. Though I'm fairly confident in this one. Thanks for the heads up about todays renewal, not been paying attention recently. Paperwork for accountant, new house at auction, mortgage paperwork, solicitors paperwork etc....It's all go! But back to LTV's, largely meaningless in so many cases. 72 percent might seem high but at least it's realistic because we know what they sold for. Some LTV's would be comical if it were not for the fact that some people are being falsely reassured and some will lose money.
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bugs4me
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Post by bugs4me on Feb 6, 2018 10:00:59 GMT
Back to topic. I’m no longer interested in the (as presented) 70% LTV market. Apart from what many may consider are spurious valuations, by the time you add on say 20% for FS (incl I presume my hoped for 12%) then the actual LTV is closer to 90% And that’s assuming everything is as accurate as can be hoped for. So rather than an investment it’s becoming IMO more of a gamble. All it takes is a few months outside of the original 6 month term and there is little incentive, if any, for the borrower to not walk away especially if you’re dealing with a SPV. Then there is the question of the platform’s ability/expertise in managing the default. In these cases there’s very little else to add. The forum is littered with examples of poor platform performance in this area. Apart from the demise of one or two platforms this year although whether they really got started in the first place is debatable, I’m also wondering which (if any) platforms are building their loan books in order to sell out. So I find myself in agreement with 09dolphin over this. Maybe time to mattress hoard rather than invest for the sake of it. |
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ozboy
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Mine's a Large One! (Snigger, snigger .......)
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Post by ozboy on Feb 6, 2018 10:35:15 GMT
Back to topic. I’m no longer interested in the (as presented) 70% LTV market. Apart from what many may consider are spurious valuations, by the time you add on say 20% for FS (incl I presume my hoped for 12%) then the actual LTV is closer to 90% And that’s assuming everything is as accurate as can be hoped for. So rather than an investment it’s becoming IMO more of a gamble. All it takes is a few months outside of the original 6 month term and there is little incentive, if any, for the borrower to not walk away especially if you’re dealing with a SPV. Then there is the question of the platform’s ability/expertise in managing the default. In these cases there’s very little else to add. The forum is littered with examples of poor platform performance in this area. Apart from the demise of one or two platforms this year although whether they really got started in the first place is debatable, I’m also wondering which (if any) platforms are building their loan books in order to sell out. So I find myself in agreement with 09dolphin over this. Maybe time to mattress hoard rather than invest for the sake of it. Rearrange to uncover the secret sentence! ........... have, the, head, You, nail, the, on, hit, .
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r1200gs
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Post by r1200gs on Feb 6, 2018 10:40:09 GMT
Back to topic. I’m no longer interested in the (as presented) 70% LTV market. Apart from what many may consider are spurious valuations, by the time you add on say 20% for FS (incl I presume my hoped for 12%) then the actual LTV is closer to 90% And that’s assuming everything is as accurate as can be hoped for. So rather than an investment it’s becoming IMO more of a gamble. All it takes is a few months outside of the original 6 month term and there is little incentive, if any, for the borrower to not walk away especially if you’re dealing with a SPV. Then there is the question of the platform’s ability/expertise in managing the default. In these cases there’s very little else to add. The forum is littered with examples of poor platform performance in this area. Apart from the demise of one or two platforms this year although whether they really got started in the first place is debatable, I’m also wondering which (if any) platforms are building their loan books in order to sell out. So I find myself in agreement with 09dolphin over this. Maybe time to mattress hoard rather than invest for the sake of it.One of the reasons I just bought a property. Too much cash. I have hugely reduced my exposure to P2P in general for all those reasons. I agree with all that, particularly regarding ability to handle problem loans and of course, to manage them before they become a problem. But, I'm still happier with this 72 percenter than I would be in some 35 percent LTV loans I've seen.
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mikes1531
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Post by mikes1531 on Feb 12, 2018 16:01:44 GMT
... I’m also wondering which (if any) platforms are building their loan books in order to sell out. Rearrange to uncover the secret sentence! ........... have, the, head, You, nail, the, on, hit, . I initially thought the strategy suggested above was unlikely. Surely anyone who would consider buying a platform would take a good look at the loan portfolio before making an offer. And if the portfolio contained a lot of dubious loans they'd either reduce their offer to reflect that, or pull out of the deal completely. Then I thought about the hordes of punters who invested in those loans, and how many of them would rush to throw money at a platform's IPO...
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