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Post by jackpease on Jan 29, 2015 19:07:20 GMT
Has anyone else had a flurry of emails on defaults today from FC?? I've had quite a few adding up to quite a lot.
Curious turn of phrase on one of them: "The guarantor has informed us that he entered into bankruptcy in October 2014, and in light of this information we are defaulting the loan..."
In the continued spirit of moving very slowly, FC is still flogging Magic (1849) that Assetz is trying to wind up. Lets see how long it takes before it's pulled from FC.
JP
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blender
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Post by blender on Jan 29, 2015 20:28:09 GMT
No flurry but one big default last week that took 0.3% off my annualised return.
Call me cynical if you like, but my interpretation is that FC do not see themselves as having any meaningful accountability to lenders on all the individual loans, but just on the general statistical performance of the loan book. My guess is that the collections and recoveries team has a fixed budget (related to the 1% charge) and uses its resources where it thinks they will be most productive in achieving the desired statistical performance. Ie top-down driven by targets rather than bottom up driven by giving each problem loan the necessary amount of attention to optimise recovery for the lenders on that loan. It was always going to go that way, but I think it has happened. You do not see, on the FC forum, any concerted criticism of FC's performance on particular loans, as was once the case. Neither flippers nor autobidders are too concerned (though whole loan lenders will be). The flurry of notes may just be the routine tidy-up of making the reports on matters that have been dealt with recently.
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markr
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Post by markr on Jan 29, 2015 22:22:30 GMT
I would agree, but I don't think that's a bad thing. If you only have limited resources, it surely makes sense to go for the low hanging fruit to maximise overall recoveries. Having said that, I'm not unhappy about Furtive Concealment's attempts to recover my rogues gallery (as reported in the comments, anyway); a fair proportion are being paid by the guarantors without quibble, some are being paid after some amount of legal pressure, and a few have been classed as unrecoverable but only after the guarantors have declared themselves bankrupt.
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Post by goldservice on Jan 29, 2015 22:28:57 GMT
I don't accept that FC has to do it like that - that's just lazy management! I thought that when recovery expenses are incurred, the borrower has to pay various charges or penalties to the recovery team. This means that Fairy Cakes has more than just part of the 1% to spend. And they could change those recovery charges to match the costs of effective recovery. This might help their reputation too.
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adrianc
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Post by adrianc on Jan 30, 2015 9:09:11 GMT
Curious turn of phrase on one of them: "The guarantor has informed us that he entered into bankruptcy in October 2014, and in light of this information we are defaulting the loan..." Very interesting - are there any arrears on it? Or is it JUST that the guarantor is no longer able to?
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Post by jackpease on Jan 30, 2015 9:42:23 GMT
Curious turn of phrase on one of them: "The guarantor has informed us that he entered into bankruptcy in October 2014, and in light of this information we are defaulting the loan..." Very interesting - are there any arrears on it? Or is it JUST that the guarantor is no longer able to? The loan is in arrrears and the guarantor went into bankruptcy in October so there doesn't seem to be any mechanism whereby if the 'security' goes pop then the loan gets quarantined in real time J
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adrianc
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Post by adrianc on Jan 30, 2015 9:49:46 GMT
Very interesting - are there any arrears on it? Or is it JUST that the guarantor is no longer able to? The loan is in arrrears and the guarantor went into bankruptcy in October so there doesn't seem to be any mechanism whereby if the 'security' goes pop then the loan gets quarantined in real time J Ah, OK. Reading your original post suggested (to me, anyway) that the only reason it'd gone default was the guarantor's inability to stand guarantee.
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Post by jackpease on Jan 30, 2015 10:01:20 GMT
The loan is in arrrears and the guarantor went into bankruptcy in October so there doesn't seem to be any mechanism whereby if the 'security' goes pop then the loan gets quarantined in real time J Ah, OK. Reading your original post suggested (to me, anyway) that the only reason it'd gone default was the guarantor's inability to stand guarantee. I'm not sure there is a solution to this but had you bought this loan part say in December before it defaulted the advertised 'security' had long been bankrupt - the time delay on that is not comforting in the same way that the time delay on the recent assetz collapse has failed to dawn on FC's magic part
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blender
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Post by blender on Jan 30, 2015 10:17:13 GMT
I don't accept that FC has to do it like that - that's just lazy management! I thought that when recovery expenses are incurred, the borrower has to pay various charges or penalties to the recovery team. This means that Fairy Cakes has more than just part of the 1% to spend. And they could change those recovery charges to match the costs of effective recovery. This might help their reputation too. That is how it should be, Goldservice, but if you do not get the recoveries then you do not get the extra charges. The problem is how to make effective use of the resources you have. There is always this basic problem with P2P in that FC are not recovering their own money but ours and they have to live within the fees and charges they receive. The money spent on recoveries is just a cost to them. Their objective must be to provide acceptable loss figure within the budget they can afford. There is moral hazard here, in that successful traditional lending operations, which have risk in the loan book, are IMO made successful in profit terms by their collections, whereas FC are sales driven - their money is principally borrower fees. When you novate your defaulted loans to FC there is a contract under which they have a duty as your agent to use their best endeavours to recover your money on that loan. I no longer regard that as meaningful on every loan, and act accordingly. I agree with markr that it will be low hanging fruit first, but plus the public pursuit of of the naughty ones.
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Post by goldservice on Jan 30, 2015 10:35:12 GMT
"That is how it should be, Goldservice, but if you do not get the recoveries then you do not get the extra charges." I had the same thought, blendr, but then I thought in that case, and given that FC do achieve recoveries from a significant number of borrowers, why not just load the recovery costs on to those borrowers? This then provides the funds to pursue the remaining defaulters with greater vigour ... though I suppose you have to strike a balance otherwise some of those defaulters who are making payments may have to stop doing so.
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blender
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Post by blender on Jan 30, 2015 13:31:02 GMT
"That is how it should be, Goldservice, but if you do not get the recoveries then you do not get the extra charges." I had the same thought, blendr, but then I thought in that case, and given that FC do achieve recoveries from a significant number of borrowers, why not just load the recovery costs on to those borrowers? This then provides the funds to pursue the remaining defaulters with greater vigour ... though I suppose you have to strike a balance otherwise some of those defaulters who are making payments may have to stop doing so. Nice idea but completely unfair and indefensible. I think the penalised borrowers would say that the appropriate thing to do would be to increase the 1% lender fee to cover the extra collection costs and that will work through as necessary into general loan interest rates. (I am not suggesting that should be done)
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