TonyL
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Post by TonyL on Jul 13, 2017 18:47:16 GMT
I sometimes wonder how much thought goes into the 70% LTV. It seems too much of a coincidence that all the platforms use 70% LTV as if that's some sort of guarantee that you'll find a buyer at auction to cover that sum. If the valuation is overly optimistic, or the asset likely to be a challenging sale, then that should be reflected in a lower LTV. If the loan goes south it should be an easy case that someone out there is going to pick up a bargain at auction, Lendy then distribute the recoveries to the lenders and the borrower then we all move on.
Lower LTVs will help in many ways...
1. Borrowers don't overstretch their commitments
2. Borrowers are less likely to take the 'easy' default option because they risk effectively 'selling' their asset too cheaply
3. Assets could sell more quickly, if necessary, to offload after default
...and the buyer who bails us all out picks up a bargain
4. If this led to more reliable and repayable loans then perhaps we as lenders would more easily accept lower interest rates, which in turn further benefits the borrowers
I'm sure someone will be able to point out a flaw in my argument, but at the moment I don't see what I'm missing...
(incidentally I'm suggesting a drop to say 60% as the new norm to make life a little more comfortable and appealing to lenders...and no, I don't know where the borrowers are supposed to get extra money if it leaves them a little short for their development)
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TonyL
Posts: 53
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Post by TonyL on Jul 13, 2017 19:32:29 GMT
I guess I really meant 60% as a typical LTV rather than a new maximum. It would seem to me a safer opening gambit and could be increased to 70% if DD justified it.
There's always going to be competition between platforms, but they seem to compete mostly with lowering rates only. I hate the result being lower rates when the risk remains unchanged. The last thing any platform should be doing is attracting 'junk' loans just to increase the loan book...I hope most of us lenders are looking for quality rather than quantity. My personal opinion is that's what happened at FC so I don't invest there any more.
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Post by robberbaron on Jul 14, 2017 7:45:08 GMT
I'm sure someone will be able to point out a flaw in my argument, but at the moment I don't see what I'm missing... (incidentally I'm suggesting a drop to say 60% as the new norm to make life a little more comfortable and appealing to lenders...and no, I don't know where the borrowers are supposed to get extra money if it leaves them a little short for their development) The problem with your reasonning is that with lower LTV (i.e. lower risk) you would likely have to accept lower rates. There is no free lunch. You can see that on all platforms lower LTVs tend to have lower rates. The only way you could keep rates where they are and lower LTV would be if the demand from borrowers wastly outstrip the supply from lenders.
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spyrogyra
Member of DD Central
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Post by spyrogyra on Jul 17, 2017 7:14:38 GMT
I think platforms are too soft on some borrowers. Defaults and pressure should be applied with no delay especially towards non co-operative borrowers (FS is a good example). Pretending nothing's wrong is another problem (SS).
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Post by p2plender on Jul 17, 2017 13:49:47 GMT
It's not their money..
I'm sure they're much more proactive when forming the loan.
Thinking SS more than others.
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Post by df on Jul 17, 2017 19:03:49 GMT
I guess I really meant 60% as a typical LTV rather than a new maximum. It would seem to me a safer opening gambit and could be increased to 70% if DD justified it. There's always going to be competition between platforms, but they seem to compete mostly with lowering rates only. I hate the result being lower rates when the risk remains unchanged. The last thing any platform should be doing is attracting 'junk' loans just to increase the loan book...I hope most of us lenders are looking for quality rather than quantity. My personal opinion is that's what happened at FC so I don't invest there any more. At least FC has quantity of both, loans and investors. New loans get funded within few hours. Despite all the efforts to increase the loan book, SS doesn't have many loans and overall quality is rather low.
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Balder
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Post by Balder on Jul 18, 2017 7:12:53 GMT
At least with Lendy as they retain interest the LTV also includes the interest for the term so a 70% LTV on Lendy is in reality a lower LTV than platforms that do not retain the interest.
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Jul 18, 2017 11:34:07 GMT
At least with Lendy as they retain interest the LTV also includes the interest for the term so a 70% LTV on Lendy is in reality a lower LTV than platforms that do not retain the interest. No it isnt. They still have to pay the whole loan back including the retained interest. It actually increases the LTV on the loan (amount to borrower) as they are paying interest and fees on the full amount rather than on just the sum they get. It does mean that servicing the loan payments arent dependent on cash flow but at the cost of a higher LTV (or smaller advance to borrower) £1m loan on Lendy, borrower gets 780k after fees interest - 70% LTV against £1.42m security (fees 40k, interest £180k) For same 780k advance to borrower on platform where fees/interest arent retained - 55% LTV against £1.42m security (fees 31k, 140k) or £1m loan on same platform, borrower gets £1m - (fees same as Lendy) -70% LTV
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binkle
Member of DD Central
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Post by binkle on Jul 21, 2017 16:54:35 GMT
Think the real killer for the market would be if RICS examined some of the valuations offered and offered a disincentive to falsely inflated examples. This would prevent developers with next to zero funds getting into the market, as can happen now.
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ozboy
Member of DD Central
Mine's a Large One! (Snigger, snigger .......)
Posts: 3,156
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Post by ozboy on Jul 21, 2017 17:24:58 GMT
I think RICS are VERY aware of what's going on re Dishonest VRs, and conveniently choose to ignore the problem and do nothing.
As I've said before, these "Professional Bodies" are all about maintaining their "Honest John" facade and, rather than disciplining any Members, prefer to close ranks and protect them, and their "Industry Reputation."
I got news for you RICS, your reputation, and image, is S**t.
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