jlend
Member of DD Central
Posts: 1,817
Likes: 1,444
|
Post by jlend on Nov 4, 2016 6:58:57 GMT
Thanks I see that Blog post has just appeared today. I will also however await their response since whilst the blog explains why they consider a ratio of well below 150%-125% as okay, due to this "discounted lifetime interest on existing loans" now being taken as a tangible PF asset (personally I am not convinced given it is illiquid, but it is an explanation), it does not answer: 1) Why the Projected Bad Debt increased from 2.6% to 2.8% on Monday 2) The Coverage Ratio falling 10% (129% to 119%) in 3 days. 9% of which on Monday. 3) Why on the PF page there are conflicting data sets (actual historic default rates 2014-16) . RS has previously indicated by email to me that they will confirm which of those numbers are correct and which are incorrect, presumably they will also correct the incorrect data. I have pasted the link to the blog. It took me at least a bit of time to find it. Thanks again, W35 www.ratesetter.com/blog/article/responding-to-feedback-on-provision-fund-flexibilityThey have posted an answer to questions 1 and 2 on a blog now. Both driven by the 2014 cohort of loans performance. Hi JLend – the Coverage Ratio has decreased due to an increase in Expected Losses (EL). We regularly update EL using actual performance observed from loans we have written in the past – we take a cohort of loans written between 12 and 18 months ago and analyse their performance, which is used as a basis for calculating an EL rate which is applied to all active loans. Therefore, this EL update reflects loans written in 2014 which performed worse than expected. Since 2014, we tightened our lending criteria and it would be reasonable to expect that will translate to improvements in performance. However, we apply a principle of caution and do not build in these potential improvements until we see them confirmed into actuals. We remain committed to meeting the target 125-150% Coverage Ratio and adjust our underwriting and pricing to help us achieve this.
|
|
wapping35
Member of DD Central
Posts: 385
Likes: 210
|
Post by wapping35 on Nov 4, 2016 7:42:56 GMT
Thanks.
Its interesting since the projected default rate was 2.8% only 6 weeks ago. I believe much of the "increase" in the coverage ratio which should have occurred due to the temporary reduction to 2.6% went on paying off that loan to the PF from RS. When I get this answer emailed to me directly, I will ask.
Edit:
Also the default rates for 2014 has been increasing for sometime. The explanation they give does not explain why they reduced the Projected default rate originally 6 weeks or so ago to 2.6%..Again when they email me back I will ask that.
|
|
jlend
Member of DD Central
Posts: 1,817
Likes: 1,444
|
Post by jlend on Nov 4, 2016 8:30:55 GMT
Thanks I see that Blog post has just appeared today. I will also however await their response since whilst the blog explains why they consider a ratio of well below 150%-125% as okay, due to this "discounted lifetime interest on existing loans" now being taken as a tangible PF asset (personally I am not convinced given it is illiquid, but it is an explanation), it does not answer: 1) Why the Projected Bad Debt increased from 2.6% to 2.8% on Monday 2) The Coverage Ratio falling 10% (129% to 119%) in 3 days. 9% of which on Monday. 3) Why on the PF page there are conflicting data sets (actual historic default rates 2014-16) . RS has previously indicated by email to me that they will confirm which of those numbers are correct and which are incorrect, presumably they will also correct the incorrect data. I have pasted the link to the blog. It took me at least a bit of time to find it. Thanks again, W35 www.ratesetter.com/blog/article/responding-to-feedback-on-provision-fund-flexibilityThey have posted an answer to questions 1 and 2 on a blog now. Both driven by the 2014 cohort of loans performance. Hi JLend – the Coverage Ratio has decreased due to an increase in Expected Losses (EL). We regularly update EL using actual performance observed from loans we have written in the past – we take a cohort of loans written between 12 and 18 months ago and analyse their performance, which is used as a basis for calculating an EL rate which is applied to all active loans. Therefore, this EL update reflects loans written in 2014 which performed worse than expected. Since 2014, we tightened our lending criteria and it would be reasonable to expect that will translate to improvements in performance. However, we apply a principle of caution and do not build in these potential improvements until we see them confirmed into actuals. We remain committed to meeting the target 125-150% Coverage Ratio and adjust our underwriting and pricing to help us achieve this. I think I am being a bit thick this morning.... they say that the EL has increased due to the cohort of loans written between 12 and 18 months ago. Isn't that loans written in 2015 rather than 2014 ? Unless I have misunderstood the word written.
|
|
pikestaff
Member of DD Central
Posts: 2,133
Likes: 1,482
|
Post by pikestaff on Nov 4, 2016 8:52:21 GMT
They have posted an answer to questions 1 and 2 on a blog now... I can't see any comments on the blog, which is asking me if I want to be the first to comment. I must be doing something wrong. Can you post a link?
|
|
jlend
Member of DD Central
Posts: 1,817
Likes: 1,444
|
Post by jlend on Nov 4, 2016 9:20:11 GMT
They have posted an answer to questions 1 and 2 on a blog now... I can't see any comments on the blog, which is asking me if I want to be the first to comment. I must be doing something wrong. Can you post a link? www.ratesetter.com/blog/article/6-year-anniversary
|
|
pikestaff
Member of DD Central
Posts: 2,133
Likes: 1,482
|
Post by pikestaff on Nov 4, 2016 12:00:42 GMT
Thanks jlend. I was looking under the "Feedback on provision fund" blog post.
|
|
wapping35
Member of DD Central
Posts: 385
Likes: 210
|
Post by wapping35 on Nov 4, 2016 13:19:21 GMT
Regarding my questions on the Provision Fund data I got this today.
Good Morning, I thought I would get back to you regarding you email below. Firstly I’d like to let you know, that we are currently undertaking a significant review of the data provided both on the website and via the downloadable loan book. This review is likely to take some time due to the complex nature of the data a company such as ours deals with. We are acutely aware that accuracy of the data we provide, is of utmost importance to many of our lenders, who keep a close eye on the figures and use this to assess the risk of the current and future investments with us. We would politely ask you to bear with us until this review is competed and I will ensure we get back in touch once the review has been completed. In terms of my example of Institutional lending, this was simple an example to illustrate that some of our figures include certain data sets and some don’t. I was not intending to indicate this was a reason for the discrepancies we are currently looking at. The discrepancies are likely due to multiple factors, hence the need for the current review we are undertaking. We do appreciate your patience in this matter; if there is anything else I can help with in the mean time, please don’t hesitate to get in touch. Kind regards,
JP Seaman Head of Customer Service | RateSetter
Tel: 020 3176 7796 6th Floor, 55 Bishopsgate, London, EC2N 3AS
|
|
jlend
Member of DD Central
Posts: 1,817
Likes: 1,444
|
Post by jlend on Nov 4, 2016 13:33:21 GMT
Regarding my questions on the Provision Fund data I got this today. Good Morning, I thought I would get back to you regarding you email below. Firstly I’d like to let you know, that we are currently undertaking a significant review of the data provided both on the website and via the downloadable loan book. This review is likely to take some time due to the complex nature of the data a company such as ours deals with. We are acutely aware that accuracy of the data we provide, is of utmost importance to many of our lenders, who keep a close eye on the figures and use this to assess the risk of the current and future investments with us. We would politely ask you to bear with us until this review is competed and I will ensure we get back in touch once the review has been completed. In terms of my example of Institutional lending, this was simple an example to illustrate that some of our figures include certain data sets and some don’t. I was not intending to indicate this was a reason for the discrepancies we are currently looking at. The discrepancies are likely due to multiple factors, hence the need for the current review we are undertaking. We do appreciate your patience in this matter; if there is anything else I can help with in the mean time, please don’t hesitate to get in touch. Kind regards, JP Seaman Head of Customer Service | RateSetter Tel: 020 3176 7796 6th Floor, 55 Bishopsgate, London, EC2N 3AS If they know there is an issue with the data somewhere I think it would be better if they pulled all the data from the website until they have sorted it to avoid any confusion and misunderstanding ?
|
|
wapping35
Member of DD Central
Posts: 385
Likes: 210
|
Post by wapping35 on Nov 4, 2016 13:40:11 GMT
Regarding my questions on the Provision Fund data I got this today. Good Morning, I thought I would get back to you regarding you email below. Firstly I’d like to let you know, that we are currently undertaking a significant review of the data provided both on the website and via the downloadable loan book. This review is likely to take some time due to the complex nature of the data a company such as ours deals with. We are acutely aware that accuracy of the data we provide, is of utmost importance to many of our lenders, who keep a close eye on the figures and use this to assess the risk of the current and future investments with us. We would politely ask you to bear with us until this review is competed and I will ensure we get back in touch once the review has been completed. In terms of my example of Institutional lending, this was simple an example to illustrate that some of our figures include certain data sets and some don’t. I was not intending to indicate this was a reason for the discrepancies we are currently looking at. The discrepancies are likely due to multiple factors, hence the need for the current review we are undertaking. We do appreciate your patience in this matter; if there is anything else I can help with in the mean time, please don’t hesitate to get in touch. Kind regards, JP Seaman Head of Customer Service | RateSetter Tel: 020 3176 7796 6th Floor, 55 Bishopsgate, London, EC2N 3AS If they know there is an issue with the data somewhere I think it would be better if they pulled all the data from the website until they have sorted it to avoid any confusion and misunderstanding ? Indeed I originally raised the inconsistencies on Oct 13th so it is clearly taking a lot of time. Hey ho... The Market Data field in the "About Us" section is also interesting re the 2014, 2015 and YTD 2016 bad debts and those projections. (versus the 2.8% Over all Projection). That is 2014- 3.89% , 2015 - 3.54% and YTD 2016 - 3.43% (i.e. all well above the 2.8% Total Projected Bad Debt used for the PF, which was 2.6% on Monday morning).. It just seems inconsistent...But to be fair RS do seem to accept that point. www.ratesetter.com/aboutus/statistics
|
|
jlend
Member of DD Central
Posts: 1,817
Likes: 1,444
|
Post by jlend on Nov 4, 2016 14:07:53 GMT
Thanks jlend . I was looking under the "Feedback on provision fund" blog post. I have posted some questions on a few of the blogs. Usually the most recent blog that ratesetter has written. As the blogs are moderated it takes a few days for the question to get approved so others can see it. Then another few days before the question is answered sometimes by ratesetter. For one of the questions I also had an additional personal reply to my email account. This was related to them changing their mind about having an independent director for the Provision Fund for various reasons. They promised an alternative way for lenders to be involved in the goverance of the Provision Fund at the time but have yet to publish what this will be. I asked for an update this week but they said they didn't yet have a date for when they would publish what they will do. This has been outstanding for nearly a year since their original notice last year of an independent director position. I will keep asking. I have also asked if some lenders can be involved in drafting the 1st March change to the Provision Fund that is now taking place.
|
|
mark123
Member of DD Central
Posts: 111
Likes: 120
|
Post by mark123 on Nov 4, 2016 15:05:43 GMT
I have received a reply to my email to RS customer services on 1 Nov.
I sent them trend data from earlier in this post and asked:
- Am I correct that the current cash in the fund is insufficient to meet expected bad debts?
- Am I also correct that the cash plus future expected income is 120% and that your published target is 125%?
- If so, what action will you be taking to restore the fund above its target?
They replied 4 Nov:
|
|
|
Post by wiseclerk on Nov 4, 2016 16:10:20 GMT
I don't know if RS can unilaterally change the contract for existing loans or only for new loans. I think that the old scheme was: not enough money in the provision fund -> resolution event. And the proposed scheme is: not enough money in the fund -> use (our) future interest to top up the fund and, if necessary, use (our) future capital repayments to top up the fund. This seems to be a lower risk arrangement. For example as a 5% shortfall in the provision fund means that we would lose our interest and a little capital, rather than the drastic resolution event. The downside is that RS can run with a lower safety margin because a provision fund shortfall does not necessarily mean the end of the business. I am not an investor on RS. But if I were, I would perceive that as a change that negatively impacts the prospects of my portfolio.
|
|
|
Post by unknown on Nov 4, 2016 18:51:19 GMT
There is a bit of a debate going on via the Ratesetter blog. It started with my original post to Ratesetter:- Dear Ratesetter I find one way to be well informed and hopefully lower my my lending risks is to keep an eye on the Peer2Peer Forum. Ratesetters replies on the Forum over the years have been very informative and have helped maintain that vital trust which we investors need with this fledgling industry. What with the very disappointing bad debt of 2014 - 15 & the recent reduction of the coverage ratio to 120% we need more information not less. Your recent announcement of no further Ratesetter involvement with the Peer2Peer Forum will only increase investor nervousness. Hi David, thanks for your comment. We will continue to provide information on this blog and elsewhere on our website as well as through our customer contact team.
Regarding the Coverage Ratio, this has decreased due to an increase in Expected Losses (EL). We regularly update EL using actual performance observed from loans we have written in the past – we take a cohort of loans written between 12 and 18 months ago and analyse their performance, which is used as a basis for calculating an EL rate which is applied to all active loans.
Therefore, this EL update reflects loans written in 2014 which performed worse than expected. Since 2014, we tightened our lending criteria and it would be reasonable to expect that will translate to improvements in performance. However, we apply a principle of caution and do not build in these potential improvements until we see them confirmed into actuals.
We remain committed to meeting the target 125-150% Coverage Ratio and adjust our underwriting and pricing to help us achieve this.
Correction (made on 4 November 2016):
There was a mistake in our original answer - it should read: "we take 12 months’ worth of loans which have been written at least 18 months ago”, looking at actual default rates for those loans. So today, those figures cover loans written from April 2014-March 2015. Apologies for the confusion.www.ratesetter.com/blog/article/guest-article-3-ways-to-lower-your-lending-risks
|
|
|
Post by ruralres66 on Nov 6, 2016 19:02:05 GMT
Belt and braces, I have posted this here as well. 15 minutes ago jlend said: www.p2pfinancenews.co.uk/2016/11/03/ratesetter-interest-buffer/Just a news story on the recent announcement "In the event that the provision fund runs out, the firm estimates that there is a £30m “interest buffer” sitting beneath the fund. This figure equates to the lifetime interest owed on existing loans, with a discount ("discount"??) applied by predicting how many loans will repay early or not at all." So, how will that be calculated? How can you predict in a crisis? More info needed, but I am pleased the forum and industry pundit concerns at last being debated and responded to by RS. Will westonkev review his running for the hills threat?!
|
|
|
Post by westonkev on Nov 6, 2016 20:57:48 GMT
Belt and braces, I have posted this here as well. 15 minutes ago jlend said: www.p2pfinancenews.co.uk/2016/11/03/ratesetter-interest-buffer/Just a news story on the recent announcement "In the event that the provision fund runs out, the firm estimates that there is a £30m “interest buffer” sitting beneath the fund. This figure equates to the lifetime interest owed on existing loans, with a discount ("discount"??) applied by predicting how many loans will repay early or not at all." So, how will that be calculated? How can you predict in a crisis? More info needed, but I am pleased the forum and industry pundit concerns at last being debated and responded to by RS. Will westonkev review his running for the hills threat?! I don't want to go into details of the calculations, because quite simply I don't know what they've done. However the logic of this capital buffer makes complete sense. It would be crazy to call a resolution event and probably wind down the platform because defaults increased so that some interest return expectations were not fully made, but capital was safe. I'd rather carry on getting reduced (say 3-4%) lender interest instead of losing the 6% totally and entering a resolution event with an unknown pay-down period. As an example, if Zopa had such a resolution event when not all expected capital was to be returned they'd have closed down during 2009-2010. And that would have been ridiculous, because they still kept most peoples capital safe and provide some interest. And are now in a much safer position. Kevin.
|
|