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Post by nesako on Jun 26, 2017 15:38:49 GMT
I think this is the situation where we will see how the Buyback guarantee holds out in a real situation. I have about 250€ in Eurocent Buyback loans, but the reply from Mintos I got back today regarding Buyback makes me very worried. As I understand it, if a loan originator goes down, the Buyback guarantee becomes worthless.I read somewhere that Mintos will try to take over, if a loan originator goes down. Thus, Mintos will try to act as a proxy and the people, who owe money to Mintos users, then pay directly to Mintos, which then distributes the payments to the Mintos users. You can read more comprehensive details, about this practice, on the Mintos website under FAQ. Mintos will take over and manage the re-payments, but if around 20% of personal loans default and get bought back, plus so many of them get extensions and even a higher proportion of those extensions default, everyone should be accepting a risk of losing 30% of money invested in any single originator.
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Post by kilozulu on Jun 26, 2017 17:52:42 GMT
Anybody knows what happens with interest rates in case Eurocent defaults? Meaning do we then get full interest on underlying loan, or do Eurocent still gets to keep the difference between the "buybacked" rate dispalyed to us and the real rate the underlying borrower pays?
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Post by nellerdk on Jun 26, 2017 18:00:46 GMT
I read somewhere that Mintos will try to take over, if a loan originator goes down. Thus, Mintos will try to act as a proxy and the people, who owe money to Mintos users, then pay directly to Mintos, which then distributes the payments to the Mintos users. You can read more comprehensive details, about this practice, on the Mintos website under FAQ. Mintos will take over and manage the re-payments, but if around 20% of personal loans default and get bought back, plus so many of them get extensions and even a higher proportion of those extensions default, everyone should be accepting a risk of losing 30% of money invested in any single originator. just let me get this clear: Are you saying, that if Mintos takes over from Eurocent, then any previous buyback guarantee is no longer in place?
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Post by wiseclerk on Jun 26, 2017 18:31:06 GMT
Yes, because the buyback guarantee comes from Eurocent (not Mintos). If Eurocent is unable (or unwilling) to fulfill it, e.g. in case of bankruptcy, then the 'guarantee' is worthless because nobody pays it. Mintos will only arrange serviceing of the loans, not take over the guarantee.
That this is a risk, was clear from the beginning of the buyback guarantees.
The 'guarantee' is only as good as the creditworthiness of the company who makes it.
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Post by thep2pinvestor on Jun 27, 2017 5:11:38 GMT
Anybody knows what happens with interest rates in case Eurocent defaults? Meaning do we then get full interest on underlying loan, or do Eurocent still gets to keep the difference between the "buybacked" rate dispalyed to us and the real rate the underlying borrower pays? This should be the case indeed. Interest rates paid by the borrowers at Eurocent are in the region of 80-100 %. We got only like 10-12 % with BB Guarantee. So Eurocent took the difference to pay for the BB guarantee. It would be coherent that we get the full interest rate if we take the full risk. This would allow us also to mitigate the dammage somewhat.
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Post by rahafoorum on Jun 28, 2017 10:22:47 GMT
Anybody knows what happens with interest rates in case Eurocent defaults? Meaning do we then get full interest on underlying loan, or do Eurocent still gets to keep the difference between the "buybacked" rate dispalyed to us and the real rate the underlying borrower pays? This should be the case indeed. Interest rates paid by the borrowers at Eurocent are in the region of 80-100 %. We got only like 10-12 % with BB Guarantee. So Eurocent took the difference to pay for the BB guarantee. It would be coherent that we get the full interest rate if we take the full risk. This would allow us also to mitigate the dammage somewhat. Last time we discussed this topic in Facebook with Mintos representative, there was no actual process for this situation in place. The representative thought though, that likely investor will still have that same interest rate as with BB and the difference will go to cover the servicing and collection of the loans. I read this as: "if the company goes bust, you're f**ked" It's extremely weird way to go about it, considering that you have pretty much no choice or info to select the risk level of specific loans you invest into and they're all with exact same pricing. In short, if you get the short end of the stick, you're going to be compensating for collection of the worse performing loans. Most likely they will hand over the process to some DCA. Somehow I doubt that Mintos wants to start creating the processes and jobs for this in-house. What's weird though, is that Eurocent was introduced to market barely 3 months ago. You'd expect they check for liquidity, cash flows, processes and such to make sure the companies aren't overexposed and overleveraged?
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Post by rahafoorum on Jun 28, 2017 10:28:21 GMT
I personally couldn't find an e-mail with announcement about this. Although I did receive an e-mail when Eurocent was introduced to the platform and even when they started adding loans in polish zloty.
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Post by nellerdk on Jun 28, 2017 10:38:50 GMT
This should be the case indeed. Interest rates paid by the borrowers at Eurocent are in the region of 80-100 %. We got only like 10-12 % with BB Guarantee. So Eurocent took the difference to pay for the BB guarantee. It would be coherent that we get the full interest rate if we take the full risk. This would allow us also to mitigate the dammage somewhat. What's weird though, is that Eurocent was introduced to market barely 3 months ago. You'd expect they check for liquidity, cash flows, processes and such to make sure the companies aren't overexposed and overleveraged?Your question is extremely important. Can someone ask Mintos this question?
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Post by wiseclerk on Jun 28, 2017 16:10:18 GMT
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kulerucket
Member of DD Central
Posts: 336
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Post by kulerucket on Jun 28, 2017 16:17:51 GMT
The announcement is also on the recent news items. I assume it would be the same as the email. In English:
"Placement of new Eurocent loans on the Mintos marketplace has been temporarily suspended. The decision was made by Mintos management following the information that Eurocent has missed the repayment of its corporate bonds.
Eurocent bonds worth PLN 1.8 million (EUR 425 000) were due on June 8, 2017. According to the company’s information, the failure to make the repayment was caused by a delay in the negotiation process to attract new financing.
Following the missed bond repayment, the management of Mintos marketplace made a decision to stop the placement of new Eurocent loans on the primary market, as well as reverse all investments where payments were still in transit to the loan originator. In addition, starting from today, June 26, operations with Eurocent loans have been suspended on the secondary market, as well. These limitations will hold until bond repayment is resolved.
The management of the Mintos marketplace is in close contact with the management of Eurocent. During a joint meeting, Eurocent’s management outlined a specific course of action to aid the bond repayment – first, by seeking to prolong the bonds, and second, by finishing the negotiations with the investor or turning to alternative sources of financing.
Eurocent continues to service the loans and collect borrower payments that are transferred to the Mintos marketplace for distribution among investors.
Caring for interests of investors on the Mintos marketplace, we continue to monitor the situation closely. We will keep you posted about any updates. Don’t hesitate to contact us if you have any questions!"
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Post by kilozulu on Jun 28, 2017 18:27:06 GMT
What's weird though, is that Eurocent was introduced to market barely 3 months ago. You'd expect they check for liquidity, cash flows, processes and such to make sure the companies aren't overexposed and overleveraged? Your question is extremely important. Can someone ask Mintos this question? Asked Mintos support and got the answers: 1) Interest rates will be unchanged, meaning we do not get an interest rate hike to compensate for lost buyback guarantee. 2) Mintos carefully reviewed the Eurocent financials when acceptting into platform and the data were solid. Will be interesting to watch how this plays out. Cynically, I would even preffer to see the Eurocent default to see how well Mintos deals with such situation.
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Post by extremis on Jun 28, 2017 22:40:04 GMT
rahafoorum , I think only those investors that had invested in at least one Eurocent loan got the announcement. Not true. I received the e-mail from Mintos a couple of days ago even though i don't have (and never had) any Eurocent loans. kilozulu, i am also very curious what will happen if Eurocent finally defaults, but i wish it will all end well and no fellow investor looses any money.
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Post by rahafoorum on Jun 29, 2017 7:28:22 GMT
rahafoorum , I think only those investors that had invested in at least one Eurocent loan got the announcement. Not true. I received the e-mail from Mintos a couple of days ago even though i don't have (and never had) any Eurocent loans. kilozulu , i am also very curious what will happen if Eurocent finally defaults, but i wish it will all end well and no fellow investor looses any money. Weird. Checked spam and trash folders and still nothing on this. I guess they used some sort of filter then still. Anyway, even a blog post is a lot better than I'd expect from some of the competitors.
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Post by Vitalijs on Jun 29, 2017 8:48:35 GMT
Dear investors, we would like to point out that the answer discussed in this post referred to the interest rate defined in the assignment agreement, which would indeed remain unchanged. However, as you correctly noted, in case servicing of the loan would be taken over by Mintos (or assigned third party), full interest would be collected. In this case, investors would get compensated for losing the buyback guarantee by receiving the remainder of interest rate spread minus the cost of servicing the loan. Another scenario is that a provision fund type of structure might get established to use the interest rate spread to cover the losses of defaulted loans.
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Post by lllmlll on Jun 29, 2017 12:48:25 GMT
Dear investors, we would like to point out that the answer discussed in this post referred to the interest rate defined in the assignment agreement, which would indeed remain unchanged. However, as you correctly noted, in case servicing of the loan would be taken over by Mintos (or assigned third party), full interest would be collected. In this case, investors would get compensated for losing the buyback guarantee by receiving the remainder of interest rate spread minus the cost of servicing the loan. Another scenario is that a provision fund type of structure might get established to use the interest rate spread to cover the losses of defaulted loans. I'm worried to see that Mintos still does not know how to deal with the situation between both possible scenarios. Buyback loan investors expect collateral on loans, not higher risk rating loans with higher interest rates. Mintos must take action against the possibility of finding new Buyback originators whose commitment leads to nothing. Maybe we are watching the beginning of the end of Buyback guaranteed loans?
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