dorset
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Post by dorset on May 3, 2018 15:28:13 GMT
Another two defaults today from loans that are only a few months old. This early failure trend is breaking new ground for me in my 6 years plus with FC.
Conventional wisdom would suggest that business failure is a lagging indicator in a recession. Perhaps however early business failure is a leading indicator of recession within the FC model. In other words a business looking at imminent failure will find that there are few sources of finance other than FC. Banks and other traditional sources of finance have some skin in the game and will have all said no. FC with no skin in the game has 1) not much reason to say no and 2) almost non-existent DD.
Perhaps FC is taking on the role of a "business" pay day loan lender but without the very high interest rates to compensate.
The performance of the FC loan book in the next recession will be an interesting test of the viability of the FC model.
Fasten your seat belts.
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Post by Butch Cassidy on May 3, 2018 15:47:25 GMT
I would definitely agree that there are more early defaults (within the 1st 12 months of issue) whether the loanbook statistics prove it or not, my portfolio performance certainly suggests that. I am certain that anyone with a failing business who is looking for a "last throw of the dice" funder is unlikely to be refused due to FC DD (or lack of it) & that a recession would likely adversely impact the FC loanbook more than the economy as a whole.
On a more positive note FC do have the best recovery process in the entire P2P field so I am happy that every avenue of recovery is pursued thoroughly & even just PG security can pay off over time, my seasoned portfolio enjoyed recovery rates in the early 40% until the most recent spate of defaults dropped that back into the mid 20%. So all isn't lost but neither am I looking to add any funds anytime soon.
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dorset
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Post by dorset on May 3, 2018 16:25:52 GMT
Yes my recovery % has now dropped from 39% to 35%.
What we may find is that recovery rates from early failures proves to be poor. Looking at my 27 defaults that have been recovered in full or almost in full only one could be classed as an early failure (less than six payments made).
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mary
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Post by mary on May 3, 2018 18:00:44 GMT
P2P has not been tested in a recession, all platforms are post 2008.
As loan books mature, defaults start to become apparent/inevitable. This is certainly the case for P2P where platforms that had crowed about zero losses are now seeing a substantial number of defaults and spooking Lenders who believed the hype and ignored the standard risk statement.
Is this portending a recession? Time will tell, but one seems to be overdue. All that can be certain is that the weak will fail and the strong may survive if they can weather the storm, for which most are not prepared.
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Post by GSV3MIaC on May 4, 2018 6:06:08 GMT
Actually I believe zopa survived 2008, although it was not quite the same animal then .. there was some actual P2P going on.
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blender
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Post by blender on May 4, 2018 7:53:36 GMT
If you wanted to use FC early defaults as an indicator of an approaching recession, then you would have to strip out those which are an indicator of an approaching flotation. That task has been made harder, deliberately imo, by withdrawing sight of new loans in the loan book after 29th March.
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agent69
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Post by agent69 on May 4, 2018 8:08:32 GMT
there was some actual P2P going on. At rates we can only dream about today.
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dorset
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Post by dorset on May 4, 2018 8:39:48 GMT
If you wanted to use FC early defaults as an indicator of an approaching recession, then you would have to strip out those which are an indicator of an approaching flotation. That task has been made harder, deliberately imo, by withdrawing sight of new loans in the loan book after 29th March. Agree that FC will have opened the taps (with your money I'm running down) to boost growth prior to the IPO. They must be keeping fingers crossed that the IPO happens before the loan book deteriorates. Post next recession we could be looking at a new "miss selling scandal" as all the new P2P punters claim that no one told them about the risks.
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benaj
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Post by benaj on May 4, 2018 12:40:17 GMT
I made a bad decison and took a big risk of having loans longer than 2 months last year, so i suffered a higher default rate of around 5% in the tax ysar 17/18 for picking bad loans manually.
Early defaults in FC loans is not a new thing. May be you will have less default for the rest of the year.
So far, i am happy with my new FC accounts, better than my old one for picking poor return.
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markr
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Post by markr on May 4, 2018 13:36:59 GMT
Pre-September, many long-time FC users, especially those interested enough in P2P to use this forum, had developed strategies aimed at avoiding defaults although admittedly with varying degrees of success. Also, pre-September, unless you had a bot or fast fingers, you'd have had limited numbers of D and E loans, whereas now you get your fair share. Unless you avoided them, you'd have probably have had more property loans (which didn't fail before the last payment) in the past before FC began winding down that part of the business.
All this, wrapped up in a layer of random chance and confirmation bias, means it is nigh on impossible to judge whether there are more early failures now based on one person's account holdings.
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blender
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Post by blender on May 4, 2018 14:41:10 GMT
Well, I can judge, markr. I had only property loans, which were immune from early failure, and I sold them before the end game. So my 10% gross became 9% net (plus cash back), copper bottomed. New, fairer, FC shares out the pain. All I have left is about £6k of Somerset for a couple of months more. Sniffle!
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happy
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Post by happy on May 4, 2018 14:44:21 GMT
If you wanted to use FC early defaults as an indicator of an approaching recession, then you would have to strip out those which are an indicator of an approaching flotation. That task has been made harder, deliberately imo, by withdrawing sight of new loans in the loan book after 29th March. And from what I remember of those Golden Auction Days, sometime loans didnt even get fully funded if they looked really dodgy and there wern't enough 50p's in the the autobid meter to munch them up on behalf of the unthinking/uncaring masses. What fun it was, having said that I have a lot more time for golf nowerdays 
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Post by GSV3MIaC on May 4, 2018 14:49:16 GMT
Yes, the ability of FC lenders to say 'No thanks, your DD sux', and either jack the rate up, or completely stop the loan going over the finish line, was the final safety net back in the days when autobid would only be allowed to take 50% of a loan. When that safety net went away, so did some of the smarter lenders.Any platform funding 100% of the pipeline / offering is either in possession of amazing DD and crystal ball(s) facilities, or else is playing fast and loose with lenders' cash. Pick.
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adrian77
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Post by adrian77 on May 4, 2018 16:54:57 GMT
Agree with all the concerns above -- I did have a large sum in Z*pa which originally did very well for me. Luckily I withdrew most of my money once they changed their business model
and their return rate has clearly nose-dived e.g. last month I had a return of about
minus 18% for the month!!!
Account summary
Category Amount
Investment total (1st April 2018) £904.73
Earnings Hide earnings
Interest earned from borrowers £11.74
Bonus: Refer a friend £0.00
Fees: Fee for selling loans - £1.63
Bad debt: New defaults - £176.03
Bad debt: Repayments from defaults
of which £3.62 had been eligible for tax relief
£3.62
earnings - £162.30
Funds in £0.00
Withdrawals - £117.51
Investment total (30th April 2018) £624.92
Just how pathetic is that - I am not saying FC will go the same way but I have withdrawn 99% of my holding...
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dorset
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Post by dorset on May 4, 2018 17:01:21 GMT
Just had a Friday default (27745). Now there is a first. Defaults coming so thick and fast we need to do daily defaults.
As an aside all of my loans were acquired before 18 Sept 2017. Been running off since but given recovery rates expect to be with FC until at least 2025!!
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