Liz
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Warning
Oct 3, 2015 18:44:54 GMT
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Post by Liz on Oct 3, 2015 18:44:54 GMT
If you are thinking of investing please first read the thread on the forum titled Eurojet, and if possible the Eurojet thread on the "VIP" forum that is several times more daming. And possibly the SAS and CTL threads.
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agent69
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Post by agent69 on Oct 3, 2015 19:45:23 GMT
If you are thinking of investing please first read the thread on the forum titled Eurojet, and if possible the Eurojet thread on the "VIP" forum that is several times more daming. And possibly the SAS and CTL threads. A lot of unhappy investors who thought that there were no risks in P2P? Clearly a lesson in the pitfalls of secured loans, but is this one any worse that the plumbing man or our ferrous friend from South Wales.
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Post by mrclondon on Oct 3, 2015 20:27:10 GMT
Liz TC was the first secured p2b platform and had at least 18 months head start on the other platforms. Don't kid yourself, similiar and worse to what you have read concerning distressed loans at TC will occur on every p2p/p2b platform. At least one of the TC loans you mentioned probably had a less than 100% honest borrower behind it. Ditto several FC loans, ditto one FK loan. C'est la vie. Also bear in mind that not all security is equal ... you need to evaluate the risk that at the point of failure of the borrower whether there is likely to be a concurrent weakening in the security (e.g. stock / wip / debtors may be negligible at the point of failure). Expect to lose at least half of all interest earnt on p2p loans through capital losses. If this causes you sleepless nights, the provision fund backed p2p loans (RS, ZP, AC accounts, W&Co) will generate a similiar return over the long term of 5 to 7%. Expecting more than this after capital losses, is I'm afraid simply fantasy.
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bababill
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Post by bababill on Oct 4, 2015 3:34:02 GMT
Mrclondon I agree with your suggestion regarding returns of 5% to 7%.. However, I am tired of sponsors repeatedly giving misleading or sometimes even false information. This should not be tolerated by any platform. And then the sponsors even have the audacity to complain that their loans do not fill.
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Post by elljay on Oct 4, 2015 11:04:24 GMT
<delurk>
Disclaimer: I have a, thankfully small, investment in this loan.
Agree there are lessons to be learned about security especially when the marital home is a major part of the security, but both TC and Richard Mason of Ludgate have gone into silent mode since Jill Sandford sent an email asking us to vote within seven days on whether to accept a full and final 18p in the £ settlement. Jill did send an update clarifying a few things but is now on holiday until after the end of the voting period. Lessons also need to be learned about platforms changing standard practices (e.g. allowing the personal guarantee to become a "guarantee of last resort" without informing lenders.). Lessons also need to be learned about what sponsors information packs are based on (e.g. how security in a property can change from £1.9m to £700k, or whether the value is independently assessed or simply what the property is on the market for).
For a platform whose headline is "An online market for secured business loans" (my bold), it's absolutely disgraceful.
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pikestaff
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Post by pikestaff on Oct 4, 2015 14:59:52 GMT
One point I'd add to mrclondon's wise post is to remember that the information is from the borrowers NOT the sponsors. All one can reasonably expect from a sponsor is the kinds of check that a bank would make before advancing a loan. This won't always be enough if a borrower sets out to mislead. Eurojet was a relatively early loan where one or two quite specific mistakes appear to have been made and (one hopes) learned from. The "silent mode" speaks for itself, elljay. The lawyers/insurers will have told them to keep schtum.
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Post by elljay on Oct 5, 2015 7:17:50 GMT
pikestaff, I'm sure the lawyers have had a say - I'm hoping that someone within TC has a conscience and they will realise that this isn't just a case of the business model didn't work. I think all lenders expect some losses and build that in, but this is different - what happened to the other property interests mentioned in the PG? No reply from TC will just lead to tears all round later when the lenders in the loan find themselves sold down the river by TC. Unhappy customers are usually quite noisy. Whoever KC is getting advice from is giving bad advice.
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Greenwood2
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Post by Greenwood2 on Oct 5, 2015 9:50:15 GMT
This is just one loan gone bad, the fault lies with the borrower, who seems to have given misleading information and is now pleading poverty to get out of his PG. A few lenders seem to have seriously over exposed themselves to this loan, for whom I am very sorry. For all of us it is a reminder that p2p lending is not risk free, diversity is king (as someone said).
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shimself
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Post by shimself on Oct 5, 2015 10:10:46 GMT
This is just one loan gone bad, the fault lies with the borrower, who seems to have given misleading information and is now pleading poverty to get out of his PG. A few lenders seem to have seriously over exposed themselves to this loan, for whom I am very sorry. For all of us it is a reminder that p2p lending is not risk free, diversity is king (as someone said). The point is that lenders aren't convinced that what the borrower is now saying can be trusted. And whether a reasonable basic check was done in the first place.
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niceguy37
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Post by niceguy37 on Oct 5, 2015 11:48:54 GMT
I think we need an independent valuation of the property to assess it's current value. Otherwise how can we know if the borrower's offer is reasonable?
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bababill
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Post by bababill on Oct 6, 2015 2:21:18 GMT
However, some lenders expectations seem unrealistic. "Sponsors" are just brokers that act for and are paid by the borrower (F&P website: "we are paid by, and act on behalf of, the borrower, not the lenders"). Their primary aim is to print the deal and worry about consequences later. Lenders need to take that into account when they look at deals. On the surface, I wanted to be in 100% agreement and thought I better rethink things myself taking into account this info...Upon further reflection I have to disagree with the above comment. Going back to Thincats homepage I read the following: ''Our accredited Sponsors make sure deals on the ThinCats platform are high quality and low risk'' It can't be both ways... Seems like a mis-selling scandal to me, even if sponsor or the platform are just commission agents... P.S. I am not in this loan either...
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pikestaff
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Post by pikestaff on Oct 6, 2015 8:03:19 GMT
I agree it's not the wisest statement in the world, but anyone who invests based only on that sentence and not on everything else on the home page is nuts. At the top of the home page:
"An investment through the ThinCats platform involves making secured loans directly to individual businesses and therefore your capital is at risk and interest payments are not guaranteed if the borrower defaults and it transpires that the value of security held to protect against borrower default is insufficient to repay your capital and interest. Your experience of defaults will affect your earnings through lending on the Platform. Please click on the "What are the risks?" button to read more."
That should be more than enough to head off any claim of mis-selling.
Besides, the loans are presumably higher quality and lower risk than those which the sponsors rejected. All things are relative.
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Post by elljay on Oct 7, 2015 6:33:52 GMT
Kevin has seen sense and cancelled the vote pending Jill Sandford returning from holiday and responding to the questions raised. Well done, Kevin.
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koba
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Post by koba on Oct 8, 2015 8:57:20 GMT
I'm not in this loan and I do feel some sympathy for the lenders on this loan. TC seem to have allowed a changed in the terms of the PG to a "last look" PG which allows the borrower to move assets in the period it takes for a liquidation/administration to proceed. It also seems the sponsor probably just took the property valuation from the borrower at face value without checking. However, some lenders expectations seem unrealistic. "Sponsors" are just brokers that act for and are paid by the borrower (F&P website: "we are paid by, and act on behalf of, the borrower, not the lenders"). Their primary aim is to print the deal and worry about consequences later. Lenders need to take that into account when they look at deals. Moreover, I don't remember any specific charge being placed against the property within the PG for this loan. Assets are then just in the background and may or may not be available in a recovery scenario. Why would sponsors do a valuation at all? Similarly TC is a "thin" platform: they provide basic administration (... and I mean very basic!) but don't expect them to cross-check all the legals the sponsor/borrower provide. Somebody like AC provides a service closer to that but the result is less deal flow, slower draw-downs and lower yields. TC is simply more "Wild West". I also think some lenders continue to have a unrealistic concept of return-to-risk. One lender made the bizarre comment "You have the upside of a loan investment and the downside of an equity investment". Err no. You have upside which is fixed and downside of par. That's pretty normal in fixed-income credit! Statistically a sub-20% recovery is hardly unusual. Senior secured loans have recovered at 65-70% over the last twenty years but that hides the fact that while most common recovery decile is 90-100%, the second most common is <10%. It's just really bifurcated. Why should secured SME loans be any better? Over a widely diversified portfolio, however, that sort of pin risk washes out. My feeling here is some lenders simply were punting this deal in too large a size. Right put my tin hat on and start digging the bunker ... An informed and informative comment as always Samford71. However, I would comment on the two statements bolded in the above. Sponsor's on TC, unlike introducers on AC, have accepted responsibility for a variety of lender-facing functions including documentation, monitoring and where necessary recovery. It is not unrealistic to expect these functions, which have been assumed voluntarily, to be performed with a degree of professionalism and competence. Of course, you might argue and I would agree with you that the TC business model is broken in several ways including the type of conflict of interest you point to (others include the fragmentation of the servicing function across multiple sponsors and uncertain and non-transparent division of responsibility/accountability between sponsor and platform). It might be natural that (some) sponsors behave the way they do. It does not make it right. "Upside of a loan investment and downside of equity" is, of course, bizarre in the general sense of describing loan investments per se. However, I doubt if the writer intended the words in this way. There are indeed loans where you are effectively getting equity with a capped upside where the writer's description is a fair if somewhat clumsy summary. For example, suppose you start up a company with £500K in equity - all in cash. I put in another £500K at 10% per annum secured on the assets of the company for an LTV of 50%. So far so good. Now suppose the purpose of the company is to place a single bet on the roulette table. Effectively I have all of your risk of losing but only make 10% if by some remote chance you win. This is an artificial and extreme example but it has analogies in some loans brought to the platform where the borrower is clearly risk-shifting in an inappropriate manner.
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shimself
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Post by shimself on Oct 8, 2015 23:11:17 GMT
...... The fact that some investors' returns have been far worse is unfortunate but not really TC's fault.... I think they should oblige sponsors to be invested in all their loans, for say 50% of their fee. It makes sponsors more interested in ensuring borrowers repay, and if the loan goes bad it makes it worth their while to maximise recovery. The two that do TCLondon aka Capital Engine and F&P have good stats (as do some others). In cityspeak it's called aligning interests. So not TC's fault perhaps but they could still do something about it.
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