nummo
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Post by nummo on Aug 15, 2019 12:04:54 GMT
Not necessarily specific to Proplend but there is often a personal guarantee associated with these loans. Does anyone have any experience withe a guarantee being called in. Presumably if the associated property venture has failed then the individual is likely to be struggling also. (I know many of these loans are in SPV's so separated from an individuals assets)
But are these guarantees worth anything in reality especially considering legal costs etc in order to recover funds?
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Post by Ace on Aug 15, 2019 13:32:10 GMT
Chocolate teapots and homeopathy spring to mind as two things that have superior worth to personal guarantees.
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nummo
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Post by nummo on Aug 16, 2019 8:02:33 GMT
Ace haha that was my feeling, would you care to elaborate on this?
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Post by Ace on Aug 17, 2019 17:20:08 GMT
From reading this forum it would seem that achieving the realisation of a PG from a borrower is a rare event.
There are many problems with PGs, not least is that the borrower will get plenty of notice before it is likely to be called upon, i.e. the time from the first default through to administrators being appointed and them selling other security assets to realise a shortfall is likely to be measured in months or years. This gives borrowers plenty of time to squirrel their other assets away out of reach of the administrators.
If a borrower has offered an unlimited PG on a loan that is obviously heading for a substantial loss that would wipe out their personal wealth, and is unable to shield that wealth from the administrators, what's to stop them from drinking several cases of Chateaux Latour 2009 while enjoying the company of their favourite escort at their favourite luxury resort and squandering the rest. Another alternative would be for them to gamble the whole lot on red for a roughly 50% chance of escaping bankruptcy. Do you know what you would do if the options were: accept bankruptcy, have a good time then accept bankruptcy, take a 50% punt on escaping bankruptcy?
Perversely, I tend to put slightly more value on a limited PG. If the borrower won't be wiped out by paying the limited PG, then only the squirreling away option is attractive. The smaller proportion of the borrowers wealth that the limited PG represents the more weight I would attach to it.
There are bound to be some scrupulous borrowers out there, but it's difficult to identify them before the proverbial brown stuff hits the rapidly rotating blades.
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nummo
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Post by nummo on Aug 18, 2019 13:37:12 GMT
Great info Ace, appreciate the detailed reply. Seems like these PG's are barely worth considering in the overall risk assessment of a particular loan.
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p2pfan
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Post by p2pfan on Aug 23, 2019 14:07:18 GMT
Yes, thank you for the delighted insight Ace. I get the feeling, too, that these PGs are not worth the paper they're written on in terms of the majority of borrowers. Obviously each loan is completely different, but does anybody know the very approximate ratio of incidences there's likely to be where PGs may successfully been called upon to repay lenders their money?
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