Clarity of underwriting policy would help.

The latest loan, 120, has become a little stuck. My own participation is limited by a concern about possible underwriting of the balance, and maybe that concern is held by others. There is no statement made about underwriting on this loan, nor any general statement of policy or intent.

The problem is the experience on loan 114, the latest car loan, which has been available at 5% discount for some months, presumably as underwriters try to shift about half of that loan through the SM. Those who lent up-front have found that they could have done much better by waiting to purchase on the SM. And because it is not amortising, the principal is not reducing and the discounting is spun out longer. Furthermore, the discounting on this loan spreads to all the other car loans, both devaluing the principal of the original holders (unless they hold to term) and making the Ablrate SM look like a poor illiquid place to be. All, I think, due to the fact that this loan 114 was for 100k min (which was underwritten) and 750k max, but when it stalled half way it was suddenly taken to the max by underwriting - to be dumped on the SM. Or at least that is my analysis.

When I look at 120, which has slowed with about £300k to go for the minimum, I am tempted by the interest rate and the welcome diversity, but I have no idea what Ablrate intend to do with underwriting. If underwriting is needed to get to the minimum, then I suppose that is what it is for - though there is no statement made about available underwriting. But what if underwriting cash it taken right up to the maximum and is then sold through the SM? That does not seem sensible, but then it was clearly not sensible on 114. And yet here we are with as much of that as you want at 95% for ever, it seems.

We are all here to do as well for ourselves as we can - that's what makes it work. And so I reckon on waiting to see what comes on the SM. However, if I had some idea of Ablrate's policy on underwriting for this loan and generally, I might go for the instant returns. 

Mar 3, 2019 16:35:26 GMT SteveT said:

Indeed. It's been eye-opening to watch large underwriter stakes offered at 4-5% discounts for several months now.

When the platform earns 5% upfront (or 6.5% in the case of #114), I guess there's an obvious incentive to keep a borrower happy by filling their loan quickly via underwriters, even if most of that % has to be dealt back on the underwritten portion.

I've hedged my bets with #120; a modest stake now and a plan to add if/when large discounts appear soon after draw-down.

Quite so,plus there is the extra monthly income for the platform. But done at the expense of the ordinary lender on 114, and of the platform by making all these car loans look bad on the SM and making it rather difficult to float any more.

This one has 5% to give away for a net benefit of the monthly income on the extra £350k past the minimum - and we don't get fooled again.