michaelc
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Post by michaelc on Apr 14, 2017 13:01:47 GMT
HI
I've not managed to find a thread here about either of the investments relating to this. I'm wondering if there is one already and I've just missed it?
If not, what do folk think about the loans on this site(s) ?
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Post by reeknralf on Apr 15, 2017 15:46:39 GMT
The valuation for these loans are based on residual value variations. These valuations are imprecise, being highly sensitive to the assumptions made.
The GDV is estimated by finding some similar local properties, and multiplying by the number in the proposed development. Little account is taken as to whether there is demand for the properties. Even if there is demand, it would take a long time to sell them individually, so the GDV estimate will be way above what the development would be worth if sold as a lump.
From the GDV is subtracted build costs, developer profit, finance costs and fees. Finance costs are often estimated at half to one third of what FS charge. Build costs are typically crude.
If you try discounting the GDV, perhaps because the market falls, or the development has to be sold quickly. Then increase the build costs and finance costs to allow for delays and a bit of reality. What starts off looking like a low LTV, very soon becomes a very high LTV.
There are other concerns specific to these loans. Sadly, forum rules preclude discussing them. Try to identify the borrower, and look at his other projects.
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09dolphin
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Post by 09dolphin on Apr 15, 2017 17:05:48 GMT
I fail to understand why FS take the view they do. Yes I know they want to maximise their profit (as do investors), but surely they understand that investors are the lifeblood they rely on. Surely if investors don't have confidence they don't actually have a business. or am I being unsophisticated or not understanding something about how they do business.
What I do know is that about 6 months ago I no ceased investing in property loans where the LTV is 65% or above as this was too risky for me. I am happy to take a lower interest rate where the LTV is less than 60% and my attitude to a renewal has become I am not interested if this is above 60% of the LTV due to the number of defaulted loans that these renewals seem to have. However I do expect a degree of honesty from FS in assessing the actual value of the security and I am starting to question their ability to achieve accurate valuations.
I know this is my perception but another thing I really don't understand is why FS accept assurances from lenders that funds are in place or refinancing is in place to repay loans months after the loan should have been repaid but these funds don't appear. There are numerous examples of this over the past 12 months. I know defaulting loans is costly but I would have thought this is less painful for all involved the sooner it is done (after about 3 - 6 months when the loan hasn't been repaid), and the more likely the borrower will have something left over when the asset is sold rather than accepting excuses offered and so increasing the borrowers costs over time due to interest charges.
Overall I would say that my perception is that FS's valuations should be treated with caution and they are prepared to accept any excuse for delays from the borrower if there is the slightest hint or chance that the loan will be repaid. even if the excuse doesn't seem very reasonable. They do seem to be rather gullible and not very professional.
Who are FS representing - the lenders of the borrowers?
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ozboy
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Post by ozboy on Apr 15, 2017 17:11:32 GMT
I fail to understand why FS take the view they do. Yes I know they want to maximise their profit (as do investors), but surely they understand that investors are the lifeblood they rely on. Surely if investors don't have confidence they don't actually have a business. or am I being unsophisticated or not understanding something about how they do business.
What I do know is that about 6 months ago I no ceased investing in property loans where the LTV is 65% or above as this was too risky for me. I am happy to take a lower interest rate where the LTV is less than 60% and my attitude to a renewal has become I am not interested if this is above 60% of the LTV due to the number of defaulted loans that these renewals seem to have. However I do expect a degree of honesty from FS in assessing the actual value of the security and I am starting to question their ability to achieve accurate valuations.
I know this is my perception but another thing I really don't understand is why FS accept assurances from lenders that funds are in place or refinancing is in place to repay loans months after the loan should have been repaid but these funds don't appear. There are numerous examples of this over the past 12 months. I know defaulting loans is costly but I would have thought this is less painful for all involved the sooner it is done (after about 3 - 6 months when the loan hasn't been repaid), and the more likely the borrower will have something left over when the asset is sold rather than accepting excuses offered and so increasing the borrowers costs over time due to interest charges.
Overall I would say that my perception is that FS's valuations should be treated with caution and they are prepared to accept any excuse for delays from the borrower if there is the slightest hint or chance that the loan will be repaid. even if the excuse doesn't seem very reasonable. They do seem to be rather gullible and not very professional.
Who are FS representing - the lenders of the borrowers? Valid points 09dolphin.
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Post by reeknralf on Apr 15, 2017 17:21:19 GMT
I fail to understand why FS take the view they do. Yes I know they want to maximise their profit (as do investors), but surely they understand that investors are the lifeblood they rely on. Surely if investors don't have confidence they don't actually have a business. or am I being unsophisticated or not understanding something about how they do business.
What I do know is that about 6 months ago I no ceased investing in property loans where the LTV is 65% or above as this was too risky for me. I am happy to take a lower interest rate where the LTV is less than 60% and my attitude to a renewal has become I am not interested if this is above 60% of the LTV due to the number of defaulted loans that these renewals seem to have. However I do expect a degree of honesty from FS in assessing the actual value of the security and I am starting to question their ability to achieve accurate valuations.
I know this is my perception but another thing I really don't understand is why FS accept assurances from lenders that funds are in place or refinancing is in place to repay loans months after the loan should have been repaid but these funds don't appear. There are numerous examples of this over the past 12 months. I know defaulting loans is costly but I would have thought this is less painful for all involved the sooner it is done (after about 3 - 6 months when the loan hasn't been repaid), and the more likely the borrower will have something left over when the asset is sold rather than accepting excuses offered and so increasing the borrowers costs over time due to interest charges.
Overall I would say that my perception is that FS's valuations should be treated with caution and they are prepared to accept any excuse for delays from the borrower if there is the slightest hint or chance that the loan will be repaid. even if the excuse doesn't seem very reasonable. They do seem to be rather gullible and not very professional.
Who are FS representing - the lenders of the borrowers? Recoveries from defaulted loans are disappointing and slow. It is in everyone's interest that FS avoid them where possible. Some loans probably should have been moved into default sooner, but most of us have 20:20 hindsight. None of this seems to have much bearing on the OP, beyond being a generic spleen venting on the FS model.
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ilmoro
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Post by ilmoro on Apr 15, 2017 17:43:24 GMT
Who are FS representing - the lenders of the borrowers? Both I suspect. The hint is in the title of the kind of finance we do
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ozboy
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Post by ozboy on Apr 15, 2017 17:52:00 GMT
As long as it's even handed.
I imagine 09dolphin's point is that the balance is arguably tilted towards the Borrower, at the expense of the Lender.
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mason
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Post by mason on Apr 15, 2017 18:47:00 GMT
Blimey, this loan looks worthy of another platform. Was never interested in this loan, but curiosity got the better of me. Couldn't see a charge against the land from FS, but it looks as though the other charge mentioned in the loan description is registered and appears to be subject to an insolvency case.
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michaelc
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Post by michaelc on Apr 15, 2017 19:45:11 GMT
Thanks for the interesting replies. Unfortunately a little too late for me - I seemingly stupidly have invested towards the higher limit I place on individual loans sucked in by the low ltv and obvious development plan.
To get some of the details referred to, it sounds like I should pay (the albeit trivial amount) for the land reg docs? I looked at the planning permission and could see there that the company that obtained permission some years ago, is now insolvent but not sure they are the same people applying for the loan.
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ilmoro
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Post by ilmoro on Apr 15, 2017 20:16:02 GMT
Thanks for the interesting replies. Unfortunately a little too late for me - I seemingly stupidly have invested towards the higher limit I place on individual loans sucked in by the low ltv and obvious development plan. To get some of the details referred to, it sounds like I should pay (the albeit trivial amount) for the land reg docs? I looked at the planning permission and could see there that the company that obtained permission some years ago, is now insolvent but not sure they are the same people applying for the loan. Dont think they are (havent looked), the borrower certainly isnt insolvent and has several loans through FS plus other loans through other companies controlled by its principle. Charge in place at CH.
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phil
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Post by phil on Apr 15, 2017 23:01:10 GMT
The valuation for these loans are based on residual value variations. These valuations are imprecise, being highly sensitive to the assumptions made. It certainly is imprecise. I think FS should always state the amount the borrower has actually paid for the plot/property then we'd all know precisely where we stood, this working backwards business to estimate value is not good enough to make an informed investment decision. To be fair to FS I have at times asked FS how much the borrower has actually paid and they have informed me, however I don't see why we should ask, it should be clearly stated on each property loan the amount the borrower has actually paid for the property/plot he is borrowing on.
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sqh
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Post by sqh on Apr 15, 2017 23:05:10 GMT
Thanks for the interesting replies. Unfortunately a little too late for me - I seemingly stupidly have invested towards the higher limit I place on individual loans sucked in by the low ltv and obvious development plan. To get some of the details referred to, it sounds like I should pay (the albeit trivial amount) for the land reg docs? I looked at the planning permission and could see there that the company that obtained permission some years ago, is now insolvent but not sure they are the same people applying for the loan. I don't think you should be overly worried about your investment. There are supplemental loans due to renew in 48 & 63 days time. We should get an update on progress when they renew. If there is no progress, then you can always decide to sell on the SM.
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mikes1531
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Post by mikes1531 on Apr 16, 2017 13:57:52 GMT
I don't think you should be overly worried about your investment. There are supplemental loans due to renew in 48 & 63 days time. We should get an update on progress when they renew. If there is no progress, then you can always decide to sell on the SM. I take the position that FS loans that outrank other FS loans on the same property ought to be among the safest on the platform because if it was necessary to 'recover' the loan FS have a huge incentive to make sure the recovery is successful. If the investors in the higher-ranking loan(s) don't receive their capital back and every bit of their accrued interest then the investors in the lower-ranking loan(s) would lose every penny they've invested. A 100% loss on a platform that deals in secured loans would be a horrible PR disaster for FS, so I'd expect them to try to avoid that at all costs, even if they have to dig into their own pocket to do so. But perhaps I'm just deluding myself.
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Liz
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Post by Liz on Apr 16, 2017 16:16:06 GMT
I don't think you should be overly worried about your investment. There are supplemental loans due to renew in 48 & 63 days time. We should get an update on progress when they renew. If there is no progress, then you can always decide to sell on the SM. I take the position that FS loans that outrank other FS loans on the same property ought to be among the safest on the platform because if it was necessary to 'recover' the loan FS have a huge incentive to make sure the recovery is successful. If the investors in the higher-ranking loan(s) don't receive their capital back and every bit of their accrued interest then the investors in the lower-ranking loan(s) would lose every penny they've invested. A 100% loss on a platform that deals in secured loans would be a horrible PR disaster for FS, so I'd expect them to try to avoid that at all costs, even if they have to dig into their own pocket to do so. But perhaps I'm just deluding myself. You sound deluded! Especially the bit about them dipping into their pocket Edit: Also, platform failure, 2nd charge holders will get burnt. The run-off company will want to wrap everything up as quick as possible.
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mikes1531
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Post by mikes1531 on Apr 16, 2017 22:00:55 GMT
A 100% loss on a platform that deals in secured loans would be a horrible PR disaster for FS, so I'd expect them to try to avoid that at all costs, even if they have to dig into their own pocket to do so. But perhaps I'm just deluding myself. You sound deluded! Especially the bit about them dipping into their pocket Perhaps. But I've been investing with FS long enough to have seen them dip into their own pocket to reduce -- or eliminate -- the impact of a default on investors in some earlier loans. What's different now is that most of their loans are much larger, so the possible investors' losses will be orders of magnitude greater, and therefore not fixable by raiding to FS's Petty Cash tin. FS didn't have lower-ranking loans/investors back then either, so the chances of a 100% loss were minimal.
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