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Post by rollercoaster on Mar 14, 2018 20:46:08 GMT
I'm not clear on how a loan moves out of non- performing.
14 days late moves them into non- performing.
If they pay on the 15th day do they return to performing? Or remain non performing until the next payment is made on time? Ow until the end of the loan?
Also I'm not convinced the update strategy will work in practice. You should work on a milestone and exception basis, that is where the value is. Investors won't care too much of a loan is performing and not near any milestones. However we do care towards the end of a loan whether the exit process had been started, and how realistic it is. We care about major updates like construction being started, sales confirmed.
I think you should listen to the queries on here to judge the loans that need more updates due to investor perceived risk.
Most importantly if you publish a planned event then you should update whether it happened and the outcome (I'm thinking Putney).
That is more useful than updates on every loan saying not a lot. The valuable stuff will be lost in the noise.
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Post by GSV3MIaC on Mar 14, 2018 21:12:23 GMT
Especially when the noise is multiplied by X-number-of-tranches .. I have to scroll down about 10 times to get past repeats of the same words for some of the larger multi-part loans.
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michaelc
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Post by michaelc on Mar 14, 2018 21:19:38 GMT
Whilst default to interest might give pause for thought (or even a wake up call for some!) or warm n fuzzies it's pretty meaningless for comparisons either with other investors or across platforms, being far too dependent on how long you've been using a platform <snip> At first I thought what you was right - its certainly plausible. However, looking at the first issue I don't see what its dependent on time using a platform. Broadly the amount of interest you'd expect grows linearly with time and the amount you invest. On the other hand, the probability of default on any given day ought to be the same. Yes, plenty of folk will say its higher the loan continues but that's only true in a cumulative sense. i.e. the default on any given day of a loan is the same as any other day. So the longer you hold the loan the more chance of default (because you've gone through more days). Therefore, shouldn't that ratio be broadly constant for a given platform ?
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carolus
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Post by carolus on Mar 14, 2018 21:45:45 GMT
Whilst default to interest might give pause for thought (or even a wake up call for some!) or warm n fuzzies it's pretty meaningless for comparisons either with other investors or across platforms, being far too dependent on how long you've been using a platform <snip> At first I thought what you was right - its certainly plausible. However, looking at the first issue I don't see what its dependent on time using a platform. Broadly the amount of interest you'd expect grows linearly with time and the amount you invest. On the other hand, the probability of default on any given day ought to be the same. Yes, plenty of folk will say its higher the loan continues but that's only true in a cumulative sense. i.e. the default on any given day of a loan is the same as any other day. So the longer you hold the loan the more chance of default (because you've gone through more days). Therefore, shouldn't that ratio be broadly constant for a given platform ? The expected value of the ratio might be the same, but if you've only been using the platform a short period of time then you're far more vulnerable to big fluctuations, and thus it's harder to draw meaningful conclusions than for someone who has invested for a long period of time. If the rate of defaults is pretty low, say a handful a year, then it's perfectly possible that someone might hit either extreme over a shortish period of time e.g. six months with zero defaults, or have defaults exceeding interest by orders of magnitude, if they hit a default very soon after investing. Once someone's been investing on a platform for several years, these variations are more likely to even out.
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pom
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Post by pom on Mar 14, 2018 21:47:45 GMT
Whilst default to interest might give pause for thought (or even a wake up call for some!) or warm n fuzzies it's pretty meaningless for comparisons either with other investors or across platforms, being far too dependent on how long you've been using a platform <snip> At first I thought what you was right - its certainly plausible. However, looking at the first issue I don't see what its dependent on time using a platform. Broadly the amount of interest you'd expect grows linearly with time and the amount you invest. On the other hand, the probability of default on any given day ought to be the same. Yes, plenty of folk will say its higher the loan continues but that's only true in a cumulative sense. i.e. the default on any given day of a loan is the same as any other day. So the longer you hold the loan the more chance of default (because you've gone through more days). Therefore, shouldn't that ratio be broadly constant for a given platform ? That assumes all platforms have a steady rate of defaults, whereas most will have a honeymoon period before defaults start happening at all. In reality we might well have the same amounts stuck in the current defaults, but as I've been using MT nearly 3 years then it will have a far lesser impact for me than for anyone that invested int he last year.
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andy1
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Post by andy1 on Mar 15, 2018 8:53:08 GMT
At first I thought what you was right - its certainly plausible. However, looking at the first issue I don't see what its dependent on time using a platform. Broadly the amount of interest you'd expect grows linearly with time and the amount you invest. On the other hand, the probability of default on any given day ought to be the same. Yes, plenty of folk will say its higher the loan continues but that's only true in a cumulative sense. i.e. the default on any given day of a loan is the same as any other day. So the longer you hold the loan the more chance of default (because you've gone through more days). Therefore, shouldn't that ratio be broadly constant for a given platform ? Sorry but I don't think risk increase is linear over time and that the probability of default is constant from day to day. I think the curve gets steeper over time. Assuming we're dealing with a vaguely honest, well intentioned borrower there will be a plan at the start of what needs to happen when in order to make the scheduled interest and capital repayments. On day 1 the plan will be on track but by day 180 reality will have inevitably deviated from the original plan so for me the risk of default on day 180 is way higher than the risk of default on day 1. That's for an individual loan. From that, the risk of a default on any given platform on any given day will therefore change up or down depending on the weighted average of the risk in the loan book.
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Post by GSV3MIaC on Mar 15, 2018 11:05:37 GMT
Plenty of data collected from Flying Chickens which showed that the chance of default increased significantly after 5-6 months, then was fairly constant .. I suspect it also decreased again near the end, but I can't remember for sure (i.e. typical bathtub shaped curve). Over there the interest was 'pay as you go', none of this 'all paid upfront, no problem will be visible until bullet time' (except of course for property loans, some of which did indeed have retained interest). For any X month bridging loan, or even development loan, with retained interest, almost all the problems are going to show up in the last few months, and (based on history) something like half the borrowers will either over-run (development) or discover that they have no actual exit ('refinance elsewhere' being subject to all sorts of headwinds).
Hence the 'sell after X months' or (on Ly) 'sell when there are x00 days left' cunning plans, which all fall to bits when 'sell on the SM' turns out to have as many issues for lenders as the 'refinance with a mainstream lender' did for the borrower.
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michaelc
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Post by michaelc on Mar 15, 2018 15:08:39 GMT
ok ok I'm wrong ! I was indeed assuming a flat repayment model which I should know better is not the case !
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