bigfoot12
Member of DD Central
Posts: 1,817
Likes: 816
|
Post by bigfoot12 on Jul 5, 2016 14:39:19 GMT
westonkevRS The actual return and estimated return at origination are suspiciously similar! (You also have a minor glitch on your about us page. Under Key Facts Average amount borrowed: [(AVERAGE_LOAN_SIZE)] .)
|
|
jlend
Member of DD Central
Posts: 1,817
Likes: 1,444
|
Post by jlend on Jul 5, 2016 18:00:51 GMT
Surprised to see Ratesetter have removed the statistic that shows the Expected default rate by year of origination. They have included some words as to why below the table where it use to be. I use to like seeing if loans as a whole were doing better or worse than expected even if the provision fund was fine. It was interesting to see what Ratesetter were assuming over time. Was there a communication from RateSetter about that? Has anyone noticed any other changes recently? The words say: " *Not applicable. Expected default rate figures are released by some platforms at the start of each year to forecast how loans written that year are expected to perform. These figures are not meaningful for the RateSetter model, since investors do not need to provide for defaults – the Provision Fund’s purpose is to cover defaults and each month we review its ability to do so (which is shown by the Coverage Ratio). What therefore matters on a year-by-year basis is whether sufficient money is put into the Provision Fund for each year’s lending to cover defaults for that cohort, and overall whether there is sufficient money in the Provision Fund to cover defaults across all active loans.
We take a data-based, objective approach by publishing the actual default rate for each year, along with the percentage of balances that have been repaid and how much of each year's contributions to the Provision Fund have been used for that cohort of loans, in addition to the Provision Fund Coverage Ratio. This is real-time, reliable data on how loans and the Provision Fund are performing." RateSetter official response to questions on this is “ the footnote hopefully gives you a good overview of why we’re no longer publishing the expected default rate (EDR) figure, but to summarise, the EDR figure is a prediction, and not something investors can or should rely on. It also doesn’t apply to the RateSetter model – it’s helpful to have an idea of expected defaults if investors have to provision for losses themselves, but because we have a Provision Fund, the Provision Fund Coverage Ratio is the more useful number. Unlike EDR figures, the PF Coverage Ratio is updated in real time and is based on real data (a cohort of loans that have been repaying for long enough to be considered a reliable sample).” As an example why it is not relevant, many lenders directly and on the forum indicate that our Provision Fund wouldn’t be sufficient because we had estimated the bad debt incorrectly for 2014. Although we did get this expectation wrong (for many reasons that I can’t go into), this neglected to highlight that we didn’t contribute to the Provision Fund a number equivalent to this expectation. We provided a much higher margin of contributions and that every cohort and under spent this contribution (i.e. bad debt less than Provision Fund contributions). But this isn't known to lenders and it's hard for us to publish this pricing as it is competitively sensitive, hence why it is better to remove this irrelevant and misleading EDR number. Kevin. Thanks for the detailed response. As it has been misleading. Perhaps there a better metric you have that you could replace it with that would serve a similar purpose ?
|
|
|
Post by westonkevRS on Jul 5, 2016 20:52:54 GMT
westonkevRS The actual return and estimated return at origination are suspiciously similar! (You also have a minor glitch on your about us page. Under Key Facts Average amount borrowed: [(AVERAGE_LOAN_SIZE)] .) The data items " actual return"and " estimated return" are correct, these were foisted upon us by the P2PFA so that we all have consistent reporting. However if your Provision Fund has been 100% then these will always be the same. It's for lending without Provision Fund, e.g. Festering Coconuts, where the returns are very different. I'll check out the [(AVERAGE_LOAN_SIZE)], thank you. Kevin.
|
|
|
Post by westonkevRS on Jul 5, 2016 21:00:50 GMT
Hi jlend, the screenshot provided by spanner is in my opinion more important: "Bad debt fund usage (bad debts as a % of fund contributions)" www.ratesetter.com/aboutus/statisticsThese are all below 100%, showing every year's surplus has been built up, hence the Provision Fund growth. Albeit not all of the loans are paid off, so the percentage will grow. Although conversely it will increase with lifetime Provision Fund contributions and recoveries from debt management plans and recoveries under PF management. Kevin.
|
|
jlend
Member of DD Central
Posts: 1,817
Likes: 1,444
|
Post by jlend on Jul 6, 2016 5:04:06 GMT
Hi jlend , the screenshot provided by spanner is in my opinion more important: "Bad debt fund usage (bad debts as a % of fund contributions)" www.ratesetter.com/aboutus/statisticsThese are all below 100%, showing every year's surplus has been built up, hence the Provision Fund growth. Albeit not all of the loans are paid off, so the percentage will grow. Although conversely it will increase with lifetime Provision Fund contributions and recoveries from debt management plans and recoveries under PF management. Kevin. Perhaps the table could be put on this page as well members.ratesetter.com/ratesetter_info/provision_fund.aspxI think that would help
|
|
|
Post by propman on Jul 6, 2016 7:45:42 GMT
Many thanks. Can I not get to this from the members area?
|
|