bernard
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Post by bernard on May 11, 2016 18:03:03 GMT
According to the latest SS missive, the interest policy for loans in default has changed (see below). I was under the impression (possibly inaccurate) that SS took all the interest up front from the borrower and distributed monthly to investors. If this were true, why would there be cashflow risk to SS in continuing to distribute interest to investors on a loan in default? So my question is, what is really happening with the interest on the loans? If the interest is not paid up front to SS, I can understand the policy change. If the interest is paid up front to SS, then I cannot understand the policy change. savingstream or others can you put me straight? Thanks "We have made a slight change to our operating procedures for ‘loans in default’ (we have only ever had one to date) - once we declare a loan to be in default, instead of crediting interest to investor's accounts monthly, interest will accrue on account and will be paid once the loan capital is recovered. This rule will only apply to the loan in default and not other loans, which will operate as usual. Loans in default can continue to be traded on the secondary market. Our solicitors have advised us to implement this as the FCA perceives Lendy's own covering of the interest as a potential cashflow risk to the sustainability of the platform." |
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Post by GSV3MIaC on May 11, 2016 18:08:30 GMT
You are right, in that interest for some defined period is paid/withheld up front .. but many (most?) loans seem to run longer than that 'intended duration' (and we are not always told how much interest is actually held anyway). After that initial interest is used up, default becomes instantly possible (borrower just doesn't pay more interest). I guess before then default would require something rather unusual, which SS can probably tell us about.
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ben
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Post by ben on May 11, 2016 18:11:21 GMT
Some loans have renewed ie they borrorower has paid another 6 months interest or whatever then in those cases the loans would not be a default , I am not quite sure which ones have paid extra interest and which ones have not as some say and others do not
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Post by GSV3MIaC on May 11, 2016 18:16:25 GMT
This is one of the 'lack of clarity' concerns about the platform .. a borrower may not have paid interest, but if we keep getting it (from SS coffers) while SS tries to sort the borrower out, we have a 'default we don't yet know about' situation. When the borrower was Lendy themselves, this was not a big issue - if the garden centre isn't paying, but lendy are, that's their problem and we don't even need to know about it. With the new structure of loans, we do need to know as soon as the interest we are (or 'should be') receiving isn't in the bank when it ought to be.
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mikes1531
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Post by mikes1531 on May 11, 2016 19:00:34 GMT
After that initial interest is used up, default becomes instantly possible (borrower just doesn't pay more interest). I guess before then default would require something rather unusual, which SS can probably tell us about. AFAIK, the most likely reason a loan would default before prepaid interest had been used up would be if the borrower became bankrupt/insolvent.
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mikes1531
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Post by mikes1531 on May 11, 2016 19:05:43 GMT
With the new structure of loans, we do need to know as soon as the interest we are (or 'should be') receiving isn't in the bank when it ought to be. This is why it's so critical that the remaining term displayed for a loan matches the period for which interest has been prepaid. Hopefully savingstream are listening to us and are making an effort to ensure that this data is brought up to date and always is updated whenever any borrower makes an additional interest prepayment in order to extend a loan.
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homes119
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Post by homes119 on May 11, 2016 19:16:22 GMT
When did the change of policy occur? how were you notified about it? I did not receive any information in this regard! Loan term should match interest upfront, period. Surely that's how it should be. Maybe we're about it get a range of defaults  |
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cooling_dude
Bye Bye's for the PPI
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Post by cooling_dude on May 11, 2016 19:19:47 GMT
When did the change of policy occur? how were you notified about it? I did not receive any information in this regard! Loan term should match interest upfront, period. Surely that's how it should be. Maybe we're about it get a range of defaults It was indicated in an e-mail sent from SS today (check you spam, as it often lands there  ) I don't get the feeling that there are any imminent defaults (one or two slightly smelling one, but no bad vibes AFAICS), just SS jumping through the hoops to get full FCA authorisation
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capucino
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Post by capucino on May 11, 2016 19:42:07 GMT
So overdue loans are not defaulted? (by overdue I mean the ones with negative remaining term)
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cooling_dude
Bye Bye's for the PPI
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Post by cooling_dude on May 11, 2016 19:43:17 GMT
So overdue loans are not defaulted? (by overdue I mean the ones with negative remaining term) The negative "remaining term" loans have not defaulted. There has only been one default on SS. A negative "remaining term" just means that the loan has gone over its original term; most of these loans have had extensions with additional interest paid.
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