Please note whilst the context I use is I, it is more a reflection on my concern for the platform rather than my personal circumstances. I will answer your points however I’ve probably done this wrong given a lack of technical competence 😊. I like that SoMo engage fairly with borrowers, allowing a bit more time to repay in cases where they are clearly trying to push through a refinance or house sale etc.
- So do I however a loan term is a loan term - I’m presently in a 6 month loan that is now 9.5 months is that fair. I took them at their word, the loan has now run for over by 60% of the original term advertised - where do you draw the line. Maybe an arbitrary 10% LTV reduction in capital or a 10% increase in interest would be a fair compromise on redemption date to prevent default interest.As for your strategy of selling loans before their term is up; that's completely fine if you would like to do that but you must be aware that this strategy is least likely to work in the times where you want it to the most (i.e. house price crash, interest rate rise etc). That's not the fault of SoMo (and I'm pretty sure I've seen plenty of warnings on the site that there is no guarantee that you'll be able to sell on the Secondary market and that many loans run way beyond their term date), it's just a risk you take on when employing your strategy.
I agree but I’ve been prevented from doing so by the (temporary) suspension of an integral part of the platform. If you really want to avoid the risks involved with loans going to term then you can offer a discount and view this as a price you are willing to pay for risk reduction.
I can’t offer a discount as the market was suspended.
I think the fact that there aren't loads of Secondary market loans with discounts shows that the market is working pretty effectively still.
The market isn’t working as SOMO albeit temporarily prevented investors putting loans on the market.It would also make no sense for SoMo to reduce the volume of new loans just so that some of their investors can offload some of their less attractive old loans a bit more easily to other investors on the platform. SOMO needs to manage the platform .
My point is if they fail to manage the secondary market during this period, it is may have a detrimental effect on the primary market. Without me and say 2 or 3 others of a similar ilk no longer contributing say £10k each to 7.8% loan @65% LTV that loan is now marketed @ a higher % potentially eroding SOMOS’S MARGIN, alternatively the borrower refuses to pay a premium, and it doesn’t hit the platform. A loss of confidence will result in investors ultimately leaving the platform. A lot of the time they are going to be waiting on responses from borrowers and will be unsure when default rates are going to be implemented or when the money will be repaid because they're not mind readers who know what the borrowers are going to do next.
Borrowers sign up to a fixed term. At the outset their objective should be refinance of the loan or redemption prior to the term date All that being said, it does seem that the Secondary market process could be improved a little and there have been a couple of good suggestions in this thread so hopefully SoMo take that on board. Apologies for disagreeing so strongly with pretty much everything you wrote dave but I wouldn't want SoMo to think those views represent all of their investor base (and I note that you already said you may be the sole investor of this opinion). Obviously fine if we just have opposite opinions here.
NO need to apologise, I agree with a lot of your sentiment. It’s just the market has changed. SOMO has never operated in a declining property market. Each of their initial valuations infers a circa 10% drop in sales price if a distress sale is invoked. That against the back drop of a 8-10% forecast drop in the market, leaves very little for payment of interest, and costs associated with LPA receivers, particularly when loans are second charges. davefoz - I'm still unclear as to what the current status of the SM is, so are you able to confirm whether it is currently possible to add up to 10 loan parts onto the SM, please?
Also some other observations if I may:
To
this point: If you weren't able to buy on the PM because you couldn't sell on the SM, isn't it logical to presume that those Lenders who
might have purchased from you on the SM will instead pick up those PM loan pieces that you hadn't purchased? (I shouldn't think think SoMo are reliant on half-a-dozen Lenders looking to churn loans in order to meet their (Somo's) origination aspirations.)
To
this point (and kind of ties in to my question above): But is it working now? Or are the restrictions still in place? As I type, the SM has 15 loan parts listed representing ten individual loans. These range from 1st 53.4% LTV paying 7.2% to 2nd charge, 70% paying 8.4%. None currently have a discount applied. Meanwhile on the 'Available' page there's 5 loans including a 1st charge, 70% LTV at 7.8% and a 2nd charge, 61.7% LTV offering 9%.
Additionally, I believe it's a little naïve for Lenders to feel that a platform has to prioritise their requirements. Lenders are suppliers and as such will, in the 'keep-em-appy' tables, rank behind the platform itself (and its legal obligations) and Borrowers, which are the platform's actual customers.
To
this point: as this loan would have reached term at around mid-Jul and given your stated strategy would have meant selling before mid-June, is the fact you are still in that loan as a result of not being able to list your loan part(s) due to restriction on the SM at that point, or because of some unrelated reason? (If it is unrelated then there's no need to share that reason; all I'm interested in is whether
somo 's implementation of the SM restriction is working that they expect it to and as a further indication that this isn't a recent occurrence.)
Apologies for all the questions
davefoz and, even though I don't necessarily share them, I appreciate the time you are taking to outline the frustrations you are experiencing. I have a significantly reduced exposure to SoMo these days since the rates fell to a point that I no longer felt they supported a justifiable risk:reward ratio. Now that rates are increasing I might be looking to re-deploy some of my surplus cash but I'll need to be convinced that SoMo has the same steady hand on the tiller that I've always believed them to have.
This faffing around with the SM - especially when it has hitherto been undisclosed (and still isn't, publicly) - is not filling me with confidence. (I learned the lesson the hard way - but fortunately when I was still young enough to recover from it - that, as a supplier, it is OK to say 'no' to a deal. If you are good at what you do in terms of the service you provide and/or the products that you deliver, there will be another deal.)