r00lish67
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Post by r00lish67 on Oct 24, 2016 11:56:19 GMT
I've just seen another 'borrower is really rather in a rush' type comment on the new E***** B**** loan, unfortunately even with 13% interest and cashback it's only 7% filled at the time of writing. Apologies if this has been asked elsewhere, but fundingsecure , have you looked at offering different tranches based on risk? My personal investment preference is to take slightly less interest for a lower LTV. If I could earn 11% interest on this loan at 50% LTV rather than 13% at 65% I'd probably be more interested. Also there's a bit of a mental block I have with big hitters being offered significantly better rates. If I'm earning 13%, and someone who happens to have £100k knocking around earns 17% on exactly the same loan, it kind of makes me suspect I'm the chump. Given human nature, I suspect even those with £75k to invest in a single loan feel slightly miffed that they're only earning 16% rather than 17%. I know that's a more contentious point though, many will disagree. Perhaps a 'clean, low LTV' tranche at 11% for everyone and then the capitalism let loose higher LTV 14-18% (depending on the size of your wallet) tranche for others?  |
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spiral
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Post by spiral on Nov 4, 2016 10:11:31 GMT
Does anyone know how FS would apportion interest in the event of a default that covers all capital but only say 50% of the interest?
Would it be that everyone gets 50% of their accrued interest or would the nominal rate of interest be satisfied before bonus rates? I assume the former but their T&C's state (in relation to sale of assets):
"Interest due to the Investors up to the date of sale (allocated pro rata in accordance with the proportion of the Loan amount which each Investor invested);"
which seems to imply the latter as it omits rate of interest from the calculation.
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mikes1531
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Post by mikes1531 on Nov 4, 2016 15:52:14 GMT
Does anyone know how FS would apportion interest in the event of a default that covers all capital but only say 50% of the interest? Would it be that everyone gets 50% of their accrued interest or would the nominal rate of interest be satisfied before bonus rates? I assume the former but their T&C's state (in relation to sale of assets): "Interest due to the Investors up to the date of sale (allocated pro rata in accordance with the proportion of the Loan amount which each Investor invested);" which seems to imply the latter as it omits rate of interest from the calculation. : I suspect the Ts&Cs were written without considering the situation you describe, despite bonuses for BHs having been on offer since FS's early days. I don't know the answer, and I expect that the only way to get one would be to ask FS directly via email and see what they say. If you do, please let us know what happens.
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phil
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Post by phil on Nov 5, 2016 7:43:52 GMT
spiral : I suspect the Ts&Cs were written without considering the situation you describe, despite bonuses for BHs having been on offer since FS's early days. I don't know the answer, and I expect that the only way to get one would be to ask FS directly via email and see what they say. If you do, please let us know what happens. Seems straightforward to me without changing the T&C, 50% of interest owed has been received therefore every investor gets 50% of his interest, the interest rate at which the investor invested is irrelevant.
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SteveT
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Post by SteveT on Nov 5, 2016 8:03:36 GMT
spiral : I suspect the Ts&Cs were written without considering the situation you describe, despite bonuses for BHs having been on offer since FS's early days. I don't know the answer, and I expect that the only way to get one would be to ask FS directly via email and see what they say. If you do, please let us know what happens. Seems straightforward to me without changing the T&C, 50% of interest owed has been received therefore every investor gets 50% of his interest, the interest rate at which the investor invested is irrelevant. Except that would not then be "allocated pro rata in accordance with the proportion of the Loan amount which each Investor invested". Lender A, who has 10X in the loan, would be receiving more than 10 times the interest of Lender B who has X in the loan. To my mind, base interest clearly ranks ahead of any "bonus" interest.
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hendragon
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Post by hendragon on Nov 5, 2016 9:11:48 GMT
As with a number of other questions the real problem here is there is no well established track record of how FS will fare with property loans that default and need to be recovered. This is not helped by the fact that the platform started as one thing (pawn) and has morphed into something else.Also with reference to risk/reward there is no default interest rate. Judging the risk/reward ratio in these circumstances has much of the Nostradamus about it.
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phil
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Post by phil on Nov 6, 2016 15:48:09 GMT
Seems straightforward to me without changing the T&C, 50% of interest owed has been received therefore every investor gets 50% of his interest, the interest rate at which the investor invested is irrelevant. Except that would not then be "allocated pro rata in accordance with the proportion of the Loan amount which each Investor invested". Lender A, who has 10X in the loan, would be receiving more than 10 times the interest of Lender B who has X in the loan. To my mind, base interest clearly ranks ahead of any "bonus" interest. I disagree, clearly the 16% investors will have the 16% interest allocated pro rata to the proportion they invested, the 15% investors will have the 15% interest allocated pro rata to the proportion they invested ect. ect. The fact that there is a bottom rate of 13% is immaterial. When interest owed is calculated it includes all bands of interest, therefore if 50% is recovered then that means 50% of the 16% band has been recovered and will be allocated pro rata to the 16% investors. I cannot see any legitimate reason why the bottom rate of interest should rank ahead of the top rate of interest. FS has a contract with the 16% investors to pay them 16%, they don't have a contract to reduce payments to 13% should there be an interest shortfall. Edit: None of my investments are above 13% so I don't have a vested interest
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mikes1531
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Post by mikes1531 on Nov 6, 2016 18:03:55 GMT
Except that would not then be "allocated pro rata in accordance with the proportion of the Loan amount which each Investor invested". Lender A, who has 10X in the loan, would be receiving more than 10 times the interest of Lender B who has X in the loan. To my mind, base interest clearly ranks ahead of any "bonus" interest. I cannot see any legitimate reason why the bottom rate of interest should rank ahead of the top rate of interest. FS has a contract with the 16% investors to pay them 16%, they don't have a contract to reduce payments to 13% should there be an interest shortfall. I can't see any reason why the bottom rate of interest should rank ahead of the top rate of interest, but I have to agree with SteveT that the Ts&Cs seem to indicate that's the way it would work in practice. It's the sort of thing that the lawyers would have a field day over in court, so ISTM that fundingsecure need to decide how they'd deal with this situation and ask their legal advisers whether the Ts&Cs as they are now are consistent with that or whether they need amending to make them more clearly match FS's intention. If paying for a bit of advice now could prevent a large legal bill in the future, it might be worth dealing with now.
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phil
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Post by phil on Nov 7, 2016 19:10:26 GMT
I cannot see any legitimate reason why the bottom rate of interest should rank ahead of the top rate of interest. FS has a contract with the 16% investors to pay them 16%, they don't have a contract to reduce payments to 13% should there be an interest shortfall. I can't see any reason why the bottom rate of interest should rank ahead of the top rate of interest, but I have to agree with SteveT that the Ts&Cs seem to indicate that's the way it would work in practice. It's the sort of thing that the lawyers would have a field day over in court, so ISTM that fundingsecure need to decide how they'd deal with this situation and ask their legal advisers whether the Ts&Cs as they are now are consistent with that or whether they need amending to make them more clearly match FS's intention. If paying for a bit of advice now could prevent a large legal bill in the future, it might be worth dealing with now. It would reach court if disgruntled 13% investors took court action because they'd decided that the T&Cs entitled them to the bonus interest that was contracted to be payable to to the 16% investor. I for one would not risk such a costly court action, I'd leave that to you and Steve T&Cs court actions have reached as far as the Supreme Court and where T&Cs are ambiguous then the court brings "commercial commonsense" into play in deciding the case. I should have thought commonsense dictates that if all bands of interest owed are totalled and 50% is received then all investors are paid pro-rata to the amount they invested together with it's corresponding interest rate.
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mikes1531
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Post by mikes1531 on Nov 7, 2016 20:16:29 GMT
I can't see any reason why the bottom rate of interest should rank ahead of the top rate of interest, but I have to agree with SteveT that the Ts&Cs seem to indicate that's the way it would work in practice. It's the sort of thing that the lawyers would have a field day over in court, so ISTM that fundingsecure need to decide how they'd deal with this situation and ask their legal advisers whether the Ts&Cs as they are now are consistent with that or whether they need amending to make them more clearly match FS's intention. If paying for a bit of advice now could prevent a large legal bill in the future, it might be worth dealing with now. It would reach court if disgruntled 13% investors took court action because they'd decided that the T&Cs entitled them to the bonus interest that was contracted to be payable to to the 16% investor. I for one would not risk such a costly court action, I'd leave that to you and Steve T&Cs court actions have reached as far as the Supreme Court and where T&Cs are ambiguous then the court brings "commercial commonsense" into play in deciding the case. I should have thought commonsense dictates that if all bands of interest owed are totalled and 50% is received then all investors are paid pro-rata to the amount they invested together with it's corresponding interest rate. The disgruntled 13% investors wouldn't argue their case as phil has suggested. They'd say they held X% of the loan so the Ts&Cs entitled them to X% of what remained after all capital had been repaid. The 16% investors would argue that X% of the total interest accrued was owed to them and so they should be entitled to X% of what remained after all capital had been repaid. At the end of the day, the lawyers would win and the investors would lose. TBH, unless it was a big loan, with lots of accrued interest, and there was lots leftover from the sale proceeds after the capital was repaid, the arguments would be over small-ish amounts of money and probably not worth arguing over, much less paying lawyers to argue over. If I were FS in that situation, I'd probably calculate the distributions both ways for everyone, and and then pay out the higher amount to each investor. I'd have to dig into my own pocket in order to cover the extra, but it probably would be worth it to keep everyone as happy as possible -- they won't be truly happy because its unlikely that anyone would get all their accrued interest -- and reduce the amount of disgruntlement.
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