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Post by zzr600 on Jun 18, 2016 3:42:38 GMT
It occurs to me if investors are expected to shoulder any losses (barring PF intervention) in the event that the sale of an asset doesn't cover the full value of a defaulted, should lenders therefore share any profits from an asset that is sold at a profit?
I raise the question as the recent SS update mentioned that the farmland may be revalued at £75M. Should the loan repayments not be made on time, that's technically a default. Can we not therefore force a sale of the asset and recover profits?
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SteveT
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Post by SteveT on Jun 18, 2016 5:26:07 GMT
If an asset recovery yields more than the sums owed (capital plus accrued interest, after recovery costs) then the lenders are repaid in full and the balance remains the property of the borrower. If you want to start sharing in profits then you need to invest in equity, not debt.
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Post by Deleted on Jun 18, 2016 7:43:25 GMT
If an asset recovery yields more than the sums owed (capital plus accrued interest, after recovery costs) then the lenders are repaid in full and the balance remains the property of the borrower. If you want to start sharing in profits then you need to invest in equity, not debt. Sorry, I don't think the borrower is in play anymore once the charge had been exercised by the Lending company Any eventual profit goes to the Lender, which becomes the new owner... In case of the previous default, of course Lendy kept all proceeeds (which were more than what borrowed) and kept the balance for itself.
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adrianc
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Post by adrianc on Jun 18, 2016 8:28:10 GMT
If an asset recovery yields more than the sums owed (capital plus accrued interest, after recovery costs) then the lenders are repaid in full and the balance remains the property of the borrower. If you want to start sharing in profits then you need to invest in equity, not debt. Sorry, I don't think the borrower is in play anymore once the charge had been exercised by the Lending company Any eventual profit goes to the Lender, which becomes the new owner... In case of the previous default, of course Lendy kept all proceeeds (which were more than what borrowed) and kept the balance for itself. Let's say your house gets repossessed because you haven't been paying the mortgage. You owe the lender £100k, including all fees, interest etc. If the house sells for £90k, you still owe then £10k. If the house sells for £110k, should they keep that extra £10k...? The scenario is no different to this. If Lendy kept everything from the previous default, then it was almost certainly because it was sufficient to repay lenders, but not enough to pay off all the remaining costs etc. If there had been, then the excess would have been returned to the administrators of the business, to distribute amongst others who were out of pocket.
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Post by earthbound on Jun 18, 2016 8:45:32 GMT
It occurs to me if investors are expected to shoulder any losses (barring PF intervention) in the event that the sale of an asset doesn't cover the full value of a defaulted, s hould lenders therefore share any profits from an asset that is sold at a profit?
In some cases, they do, (sort of) most companies, including SS charge additional "default interest" not sure how much, i would guess additional 2% ? If the asset realizes enough, then the additional default interest is distributed to the lenders, In the case of SS, they have stated that they charge this addition interest but keep it themselves, or should i say intend to.
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Post by pepperpot on Jun 18, 2016 8:57:30 GMT
It occurs to me if investors are expected to shoulder any losses (barring PF intervention) in the event that the sale of an asset doesn't cover the full value of a defaulted, should lenders therefore share any profits from an asset that is sold at a profit? I raise the question as the recent SS update mentioned that the farmland may be revalued at £75M. Should the loan repayments not be made on time, that's technically a default. Can we not therefore force a sale of the asset and recover profits? No. Treating customers fairly rules wouldn't be met. E.g. You pay down 24yrs out of your 25yr mortgage, but lose your job and can no longer pay and have no PPI !, do you want to lose (say) 95% of equity you have built up in your house? Edit, I tend to take things to the extreme to see if a theory still works, so where someone has forgotten about the last £1 of debt against the swankiest Thames river view central London penthouse apartment with a suitably large price tag, is it fair that they have to forgo their 99.999% of equity due to a lapse in concentration? In that situation, I'd be glad of the Treating Customers Fairly rules.
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SteveT
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Post by SteveT on Jun 18, 2016 9:16:52 GMT
If an asset recovery yields more than the sums owed (capital plus accrued interest, after recovery costs) then the lenders are repaid in full and the balance remains the property of the borrower. If you want to start sharing in profits then you need to invest in equity, not debt. Sorry, I don't think the borrower is in play anymore once the charge had been exercised by the Lending company Any eventual profit goes to the Lender, which becomes the new owner... In case of the previous default, of course Lendy kept all proceeeds (which were more than what borrowed) and kept the balance for itself. No, you're wrong there. If you were kidnapped and held hostage for a couple of years, unable to pay your modest mortgage, you'd be pretty annoyed once released to find your lender had sold your house and kept the lot!
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Post by bracknellboy on Jun 18, 2016 9:19:31 GMT
It occurs to me if investors are expected to shoulder any losses (barring PF intervention) in the event that the sale of an asset doesn't cover the full value of a defaulted, should lenders therefore share any profits from an asset that is sold at a profit? I raise the question as the recent SS update mentioned that the farmland may be revalued at £75M. Should the loan repayments not be made on time, that's technically a default. Can we not therefore force a sale of the asset and recover profits? No. Treating customers fairly rules wouldn't be met. E.g. You pay down 24yrs out of your 25yr mortgage, but lose your job and can no longer pay and have no PPI !, do you want to lose (say) 95% of equity you have built up in your house? ... while it would not be treating customers fairly, its not really the reason that it can't be done. We don't OWN the asset @ default in the sense that the OPs suggestionn would imply. We have a CHARGE over it as 'protection' against the loan liability. That means the asset can be disposed of to repay the loan liability (and associated costs), but no more. And even that can't be done simply how the charge holder likes: authority to dispose to enable recoveries comes with some responsibility to ensure reasonable value is obtained - because again we don't really own the asset.
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sl75
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Post by sl75 on Jun 18, 2016 13:50:14 GMT
Our share of the profit is the 1% per month interest, and is at far less risk than the borrower's share of the profit.
As SteveT says, "If you want to start sharing in profits then you need to invest in equity, not debt."
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nick
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Post by nick on Jun 18, 2016 19:12:33 GMT
No. Treating customers fairly rules wouldn't be met. E.g. You pay down 24yrs out of your 25yr mortgage, but lose your job and can no longer pay and have no PPI !, do you want to lose (say) 95% of equity you have built up in your house? ... while it would not be treating customers fairly, its not really the reason that it can't be done. We don't OWN the asset @ default in the sense that the OPs suggestionn would imply. We have a CHARGE over it as 'protection' against the loan liability. That means the asset can be disposed of to repay the loan liability (and associated costs), but no more. And even that can't be done simply how the charge holder likes: authority to dispose to enable recoveries comes with some responsibility to ensure reasonable value is obtained - because again we don't really own the asset. This is right. Having a charge on an assets only gives you the legal right to sell the asset to cover the debt owed. You are obliged to act reasonably and fairly to ensure that a fair market price is obtained for the asset. There have been recent cases where banks (I can't recall which) were found guilty of selling charged assets of a borrower (who had defaulted) to 'friendly' parties at an artificially low price to secure a quick sale at the significant detriment of the borrower. This is why it is fairly common for a charged asset to be sold under auction as it lessens accusations that asset was sold at an artificially low price.
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spyrogyra
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Post by spyrogyra on Jun 19, 2016 17:59:35 GMT
Regulations in regards with residential mortgages are very tough and protecting the borrowers as it is their home. It's quite different with commercial properties. I am not sure whether regulations allow someone to keep profits for themselves, but just saying that the comparison with a resi mortgage is not the best in the case. Perhaps it might be down to what's in the loan agreement. Disclaimer:not into this loan but interested in all similar matters concerning loans/p2p lending.
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