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Post by loontik on Dec 28, 2016 20:02:34 GMT
I was just reading through one of the loan agreements and the buy back section seems to be complicated with a lot of math. This leads me to believe that buyback guarantee is merely a guarantee to buyback the loan but you might not get back the full invested amount? In other words its a guarantee from the loan originator saying you have a ready and willing buyer in the secondary market (at a discount I assume) if in case the loan defaults and runs over the 30 or 60 day period.
Please correct me if i'm wrong on this.
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jonah
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Post by jonah on Dec 28, 2016 20:45:29 GMT
I was just reading through one of the loan agreements and the buy back section seems to be complicated with a lot of math. This leads me to believe that buyback guarantee is merely a guarantee to buyback the loan but you might not get back the full invested amount? In other words its a guarantee from the loan originator saying you have a ready and willing buyer in the secondary market (at a discount I assume) if in case the loan defaults and runs over the 30 or 60 day period. Please correct me if i'm wrong on this. It might help if you mentioned which platform....
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Post by loontik on Dec 29, 2016 7:23:31 GMT
Platform is mintos.
And thanks guys for the replies. Let me put it this way.
You invest €10 in a loan that has a buyback guarantee.
If the loan defaults and the 60 days are up, then I am of the opinion that you do not get back the €10.
On the contrary, the buyback price is calculated based on your claim price, number of days, yada yada yada. Thus, you won't get back your €10 but rather the price determined by the various factors, which I assume in most cases will be at a discount. So maybe you will get back some of the €10 invested but not the whole €10.
Hope this is a bit more clear?
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JamesFrance
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Port Grimaud 1974
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Post by JamesFrance on Dec 29, 2016 7:48:37 GMT
In this case you get back the full €10 plus all the interest up to the date of buyback, as long a the originator is solvent.
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upland
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Post by upland on Dec 29, 2016 9:46:58 GMT
Sometimes I think that these legalese wordings and structures are a little academic. If they run out of cash then there is a problem one way or another. If I were to do badly out of a platforms investments even if it were all correct and according to the letter of the law and that I would have signed etc etc etc and had been warned etc etc. My future investments with them would decline. I did that in another investment field and in effect ones money is chasing success. I would probably be caught out by a fly by night sting operation but hopefully would not have too much invested. If the platform is a bit 'sharpe' then I will move away , nobody can make me buy more. I am happy to take fair losses and inconvenience but when it comes to feeling one is being a mug...
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fric
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Post by fric on Dec 30, 2016 7:32:50 GMT
Platform is mintos. And thanks guys for the replies. Let me put it this way. You invest €10 in a loan that has a buyback guarantee. If the loan defaults and the 60 days are up, then I am of the opinion that you do not get back the €10. On the contrary, the buyback price is calculated based on your claim price, number of days, yada yada yada. Thus, you won't get back your €10 but rather the price determined by the various factors, which I assume in most cases will be at a discount. So maybe you will get back some of the €10 invested but not the whole €10. Hope this is a bit more clear? Could you point out to a specific loan originator and where did you read it? I have had no problems with buybacks and everything has been paid in full. One thing that pops up in mind - those might be some clauses regarding issues if the loan originator itself is in trouble and simply cannot buyback everything. Logically there would be a sale of the portfolio in a case of bankruptcy and after all the fees and everything - yeah, you would most likely get a lot less.
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Post by loontik on Dec 30, 2016 17:18:38 GMT
Hi, it wasn't specific to one loan originator but across many different ones. I found it a bit weird on how the "Buyback" worked especially by throwing in a complex (at least for me) formula out there, instead of simply saying, your initial investment and any interest will be secure.
My understanding of 'buy back' was that the loan originator would be a willing buyer on a defaulted loan beyond 60 days as compared to being left high and dry. Anyways, it seems that this isn't the case going by the replies here. So thank's once again. Will hit back on this when I deal with my first default.
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Post by kilozulu on Dec 30, 2016 22:24:17 GMT
Hi, it wasn't specific to one loan originator but across many different ones. I found it a bit weird on how the "Buyback" worked especially by throwing in a complex (at least for me) formula out there, instead of simply saying, your initial investment and any interest will be secure. My understanding of 'buy back' was that the loan originator would be a willing buyer on a defaulted loan beyond 60 days as compared to being left high and dry. Anyways, it seems that this isn't the case going by the replies here. So thank's once again. Will hit back on this when I deal with my first default. Where did you see that formula?
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Post by loontik on Jan 2, 2017 8:52:26 GMT
In Mintos. You have the loan agreement (PDF icon) which shows all the details. Claim amount + buyback formula.
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Post by mopcku on Jan 2, 2017 14:00:04 GMT
In Mintos. You have the loan agreement (PDF icon) which shows all the details. Claim amount + buyback formula. On which page is this?
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fric
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Post by fric on Jan 2, 2017 17:41:49 GMT
This is what I found - don't see anything there really, that would suggest what OP was initially suggesting. in 10.5 its quite clear that the buyback price is equal to the remaining principal (yes, if you for some reason bought it in secondary market, you might loose money).
You can find the agreement under my investments and than clicking the pdf icon next to the loan you have in question.
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Post by loontik on Jan 4, 2017 7:08:29 GMT
guys.. so I did a bit more research and discovered that this is specific to some loan originators only. I looked only at a few (Creamfinance doesn't have this), but Creditstar, Lendo has this (need to check among other loan originators). Refer to the screenshot below.  Buyback price = CP (n) * (1 + P *(Date of buyback – Date of last payment received by the Assignee)/360)
Where:
CP (n) is the Claim Price after n number of principal amount repayments stipulated in the schedule attached
to the Loan Agreement are received
CP (n) = R/p * (1 – (1+p)^n)) + CP * ((1+p)^n)
Where:
p – P/12
n – number of principal amount repayments received by the Assignee.
R - monthly principal amount repayment converted from Georgian lari (GEL) to euros (EUR) based on the
Exchanged Rate and is calculated = PA/#P.S: It would be great if someone who has more knowledge of this can post an example based on the above formula to help me/us understand on the buyback price. |
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Post by rahafoorum on Jan 6, 2017 12:40:33 GMT
I'm pretty sure I misunderstood half of it at least, since there's no explanation for all the letters there and it is pretty confusing. Set up a few formulas here though. docs.google.com/spreadsheets/d/1KG_Txgn4PkfCTm27kSZSw2ZNJm3MsimnyzsXVYt2Rjc/edit?usp=sharingFrom what I understood, I made the following assumptions: P = annual interest rate CP = initial investment R = monthly principal payment amount (in calculations used all monthly principal payments as equal for simplicity without currency conversion) 1. CP (n) = R/p * (1 – (1+p)^n)) + CP * ((1+p)^n)Split this into two parts: R/p * (1 – (1+p)^n))R/p - seems to be dividing monthly payment with monthly interest rate and achieves a weird number that I have no idea what it's supposed to be; essentially if R = 1%, then it calculates what the 100% € value would be. (1 – (1+p)^n) - seems to be calculating a negative total cumulative interest for the n months where payments have been made In total, this part of the formula seems to be calculating a negative € value to be deducted from the value on the right side of the formula. This seems to be the principal amount + interest received on this principal for this duration, although I'm not entirely sure what the R/p is actually supposed to be. CP * ((1+p)^n) - this part seems to be calculating the sum of interest payments received for the past n months on initial investment + initial investment CP (n) = the actual "price" of the loan, which I would assume is the amount of principal outstanding, although the formula seems to be way more complicated for this than needed. The entire formula seems to be calculating a deduction of some interest on left side that was not received and then adds some interest that was not received on right side and the deduction evens it to the actual values. Essentially you'd receive same result when you would add to initial investment the interest received on only outstanding principal and deduct the principal already paid so far (R*n): CP*(1+p)+(CP-R)*(1+p)+(CP-2*R)*p+...+(CP-(n-1)*R)*p-R*n Which is very weird, since that would indicate that current price also includes previously already received interest? Or that R actually includes received interest and everything I've written so far is wrong  2. Buyback price = CP (n) * (1 + P *(Date of buyback – Date of last payment received by the Assignee)/360)
The buyback price formula simply calculates the amount of days the interest rate has been accrued before buyback and calculates the accrued interest assuming a 360 day year. |
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Post by mopcku on Jan 6, 2017 17:59:24 GMT
So if we denote the first n principal repayments by p_1,..,p_n the remaining principal after these payments will be
CP-(p_1+…+p_n)
In the case of full amortization we know that
p_n=(c-p*CP)*(1+p)^(n-1)
where c is the monthly payment (principal + interest).
Now we can write the above as
CP-(p_1+…+p_n) = CP-(c-p*CP)*[(1+p)^0+…+(1+p)^(n-1)]= CP-(c-p*CP)* [(1+p)^n-1]/p=c/p*[1-(1-p)^n]+CP*(1+p)^n
I used the formula for the sum of geometric series.
This means the above formula correctly represents the not repaid part of the principal.
BR
Mopcku
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