|
Post by bengilbert on Mar 30, 2014 18:50:10 GMT
I think the videos from the Assetz lender day are worth looking at in order to get a sense of the people involved in the business, but in case some people don't want to sit through the full 3 hours worth, here is what I found most interesting/important from watching:
>Defaults vs losses. Andrew Holgate presented it this way - a default is when a borrower breaks some terms of the loan. This isn't always a bad thing. Some things can be included in the terms of the loan which give a forewarning of problems that might be on their way - once they've happened, you can get in early to try to manage the process of protecting lenders' money. So, a default can be the start of a process of securing lenders' money, rather than an admission that the money has been lost.
>Default process. (All this was new to me) If there's a default, Andrew said that they would tell lenders immediately. They would then put together a default management team, which would include someone from Assetz, an external lawyer experienced in insolvency/business turn-around, and an accountant. The team would work out possible scenarios for going forward. They would then put these scenarios to lenders to vote on, with 1 pound in the loan = 1 vote.
>Insurance. Andrew said they get copies of relevant insurance documents sent to them every year. If they don't receive them, they have grounds to default the borrower.
>Assetz Capital as a business. Andrew said they've been profitable for quite a while (I think he said 6 months), although there were large set-up costs so the first year accounts will show a loss. David Penston said that they spent 2 and a half years getting the business set up, and they decided to target the areas where banks don't want to get involved at the moment, which is SME and property, since banks made so many mistakes there earlier. (An aside - I've got a Thincats loanpart for 'Assetz for Investors', one of the other Assetz companies, which was auctioned in March 2012, which I suppose is evidence they were already looking at p2p back then).
>Assetz group. The Assetz group is a series of stand-alone companies. The common factor is that Stuart Law is involved in / a majority shareholder in all of them. Assetz for Investors was the first in the group, and they are an online broker of investment property with a database of 60,000 - 65,000 investors.
>Development loans. David Penston said that lenders' money is only given out bit by bit to the borrower, against invoices. A monitoring surveyor goes out every month to check progress. (I was in the Nottingham student development loan from April 2013 and they sent the surveyor's report every month plus photos from the site)
One question I was left with:
>How do Assetz monitor companies to check they haven't breached any of the terms? Who actually does the checking - someone within Assetz, the broker, a third party? The early-warning value of the loan terms is only of value if you learn in time that they've been broken. I don't know if Assetz have formalised any sort of programme for ongoing monitoring - I can imagine that it would be a lot of work.
|
|
|
Post by bengilbert on Mar 2, 2014 9:19:23 GMT
When I go to look at the units on the Hackney loan, it takes a long time for the page to load, and when I try to select some units using the slider, the page seems to lock and become unresponsive.
Is it just me or are others having this problem? I don't want to bother Chris if it's just an issue on my side, but if it's more general, I think they need to look at fixing it.
|
|
|
Post by bengilbert on Feb 28, 2014 9:14:22 GMT
There was some discussion of the CCL issue here: p2pindependentforum.com/thread/247/lending-limited-companyMy understanding (not a tax advisor) is that you don't need a license for loans to limited companies, or loans to individuals/partnerships which are over £25,000 and where the loan is to be used for business purposes. The outstanding question is whether, when your company lends under £25,000 on a loan which in total is over £25,000, you need a license or not. (Source: www.oft.gov.uk/shared_oft/business_leaflets/consumer_credit/oft140a.pdf on the Consumer Credit Act 1974 '3.21 The Act does not regulate: • a consumer credit agreement by which the creditor provides credit exceeding £25,000, or • a consumer hire agreement requiring the hirer to make payments exceeding £25,000 provided in each case that the agreement is entered into by the debtor or hirer wholly or predominantly for the purposes of a business carried on, or intended to be carried on, by him. 3.22 An agreement is presumed to be wholly or predominantly for business purposes if it includes a declaration to that effect by the debtor or hirer, in a prescribed form, unless the creditor or owner knows or has reasonable cause to suspect that this is not the case. 'Business' is defined in section 189 of the Act, but a person is not to be treated as carrying on a particular type of business merely because occasionally he enters into relevant transactions.')
|
|
|
Post by bengilbert on Feb 25, 2014 18:15:48 GMT
Just how are the FCA going to monitor things. Are they going to carry out spot 'arrow' visits or simply rely upon 6 monthly financial returns, etc, etc. I actually asked a question to the FCA person about this - how they will check whether or not platforms are complying with the rules on things like client money or arrangements to take over loans in the event of failure. But I don't think I made myself clear because they didn't really explain, beyond saying that, if I have a dispute about something, I will be able to go to the ombudsman once regulation comes in, and they will be able to arbitrate (not much use if a platform has already gone under). If the FCA can't give an answer, I think it would be worthwhile for the platforms to explain to us how they will be demonstrating that they are meeting the rules. Generally, some sort of third party confirmation that platforms are really doing what they say they are doing would have of a lot of value in boosting confidence (even though I've no reason at all to doubt that they are).
|
|
|
Post by bengilbert on Feb 25, 2014 17:00:12 GMT
I was at the p2p Finance Association's annual conference earlier today - I was invited to speak on one of the panels which had 'real' lenders and borrowers giving their experiences. A few observations:
-Sajid Javid MP, Financial Secretary to the Treasury, was there. He gave a little speech about the value of competition in the finance sector etc. He didn't say anything surprising or concrete, in my opinion. When he was pressed on the tax situation with p2p lending, he suggested that it was being looked at, but it's hard to know if there's any substance there.
At least the fact he was there suggests that there's interest in and a degree of support for p2p within government.
-A panel with the CEOs/founders of Zopa, Funding Circle, Ratesetter, Thincats and LendInvest took questions. I have to say, I was very impressed. They gave thoughtful answers about where they saw the industry going and the challenges they saw.
Speaking on possible future competition from banks, the people from Zopa and Ratesetter stressed that they don't think it's just that they can lend where banks are unable/unwilling, but that they think they can do it better than banks - better risk evaluation systems, more frequently iterated, and better technology compared with the 'spaghetti' in the banks' systems.
Funding Circle said that they thought they could offer 50-100% more loans, especially to borrowers with the greatest challenges in getting bank funding, if the tax rules didn't make it so disadvantageous to lend to higher-risk borrowers.
-Some people from the FCA spoke about the regulatory regime about to come in. They said that they were going to their board later this week with their proposal, and we should expect to find out the details next week. It still sounds to me that their proposals are sensible and should make it easier to lend with more confidence in basic things such as that platforms segregate lenders' money and there are arrangements for their loans to be taken over by a third party if they should fail.
-I got to talk to Partel of isePankur, who seems to have big plans. Apparently they got investment earlier this year or last which has allowed them to expand their team quite a lot (perhaps I can get details, if it has any value in establishing that the platform is at least a legitimate operation).
I told him that he should get more active on here!
|
|
|
Post by bengilbert on Feb 25, 2014 14:56:39 GMT
I agree with a lot of the concerns here but just want to point out that, as I understand it, this is just a proposal which they have made available in order to get feedback on it. I would guess they'll be making some changes.
|
|
|
Post by bengilbert on Feb 20, 2014 9:53:33 GMT
Good point, it was just returns minus default losses, things would look a lot worse once tax was factored in.
|
|
|
Post by bengilbert on Feb 19, 2014 17:43:45 GMT
Thanks a lot for sharing that - I didn't know that isePankur had made their loan book available for download, and being able to look in detail really helps since I wouldn't have known where to start on estimating the chance of an Estonian borrower defaulting.
One very quick analysis I just did (very possibly with errors, haven't checked it) was to see what default losses (principal outstanding at default minus recoveries) were on all loans that should have run to their end (defined as having a end date more than 60 days before the date of the data, which was 6 Feb 2014). I got this:
completed loans made in H1 2011: 227,890 default losses: 15,428 (6.8%)
completed loans made in H2 2011: 201,940 default losses: 10,092 (5.0%)
completed loans made in H1 2012: 61,490 default losses: 1,491 (2.4%)
All these loans had a maximum term of 2 years, so the figures for the 2011 loans include almost all the loans made then. The average loan term for the completed loans was 1.6 years for H1 2011, 1.7 for H2 2011 and 0.9 for H1 2012 (reflecting the fact that longer loans from 2012 haven't yet completed).
If the annualised rate of default losses runs at 3-5%, that would suggest something like 15-20% net returns, pretty good unless there are reasons to think that default rates are likely to be higher in future.
|
|
|
Wellesley & Co (W&Co) in Administration
Wellesley & Co
Feb 12, 2014 15:24:24 GMT
Post by bengilbert on Feb 12, 2014 15:24:24 GMT
I'm not knocking Wellesley, but I got stung very badly in 2012 when a "guaranteed" bridging loan fund that I had invested in went under. badger, could you give any more details of what happened with the fund that went under? Bridging loans look well-secured to me but for an investment that pays over 10%, I assume there are some not-insignificant risks. Hearing about loans that went wrong might help make it clearer where exactly the risks are.
|
|
|
Wellesley & Co (W&Co) in Administration
Wellesley & Co
Feb 10, 2014 13:38:37 GMT
Post by bengilbert on Feb 10, 2014 13:38:37 GMT
I hope Wellesley will come in to confirm this or not, but from what they've written before:
-If there's a default, the asset is sold to cover the outstanding loan. -If the sale proceeds don't cover the loan, the losses will first come out of whatever part of loan Wellesley are still holding (at present, about 20% of total loans, though I don't know what their target is for this figure to settle at). -If there are still losses to p2p lenders after Wellesley have been wiped out on the loan, the provision fund will cover them if it can.
If all works the way they describe it, that sounds like strong security to me.
I also don't know why some p2p lender funds aren't covered by the provision fund, I hope they'll explain this soon.
|
|
|
Post by bengilbert on Feb 1, 2014 18:55:53 GMT
Good to see someone from rebuildingsociety on the forum.
Just wondering what other lenders' opinions are of them?
They still seem to have an imbalance of borrowers over lenders, meaning that auctions close at what seem to me to be high rates (13-20%). They haven't had a load of deals but enough to have something of a track record - perhaps comparable to Funding Knight? But the loans on FK usually close at about 10-11%, so I'm wondering on why the rates are so much higher on rebuildingsociety.
My thoughts about them (having invested, mainly in deals with property security such as charges on residential property and paying 14-17%): -Very diverse borrowers, some of them seem highly risky, others quite solid. -Usually not very detailed information about the borrowers, I sometimes find it hard to get a good picture of the business -They haven't done a great job of convincing people that they can be trusted in all the background things that a platform is responsible for, eg due diligence, chasing and making recoveries if a loan goes bad. This may just be insufficient communication - when I've had to contact them myself, they've seemed on the ball.
Example of why I'm asking - there's a deal currently live, L** S** Ltd, data centre company, looks likely to close at 15-17%. 5 year repayment, 150k, but they've got an underwriting-type commitment from someone to bid 100k once it gets to 50k. Responses in the Q&A look credible to me (I think the borrower did a live web Q&A session on an earlier loan, which is being refinanced/expanded with this one). Seemingly strong asset position. I haven't really got a view on the quality of this loan but it seems to me worth a look and might not offer such a high interest rate if it were listed elsewhere.
Are the high rates mainly because people are concerned that recoveries on defaults will be low, due to questionable wording in the T&Cs? If so, Nick, would you like to comment? Any other thoughts from anyone?
|
|
|
Post by bengilbert on Jan 29, 2014 11:07:26 GMT
Not sure what I can add that helps, but - the bit of Hackney where the properties are is the part that's closer to the City / central London. The streets round there are mainly attractive Victorian terraces and there's a small park called London Fields nearby. It's become a popular place to live because it's a fairly calm residential area but also easy to get to the City or the centre. (I used to walk to work in the City) I think people were a bit wary of it as 'East London' some years back, but it's changed massively in the last 10-15 years.
|
|
|
Post by bengilbert on Jan 29, 2014 10:31:17 GMT
I lived in Hackney for quite a while and still have a flat there. I got the address of the properties from Assetz and it's in a good part of Hackney - near London Fields and not far from the border with Islington, if that means anything to anyone. It's not far from the tube too.
Happy to answer any questions about the area.
|
|
|
Post by bengilbert on Jan 28, 2014 15:51:50 GMT
Is it all right to use a generic name, which doesn't give away the borrower's identity, without asterisks? eg the 'Yorkshire Leisure Business Loan' on Assetz.
|
|
|
Post by bengilbert on Jan 25, 2014 23:29:14 GMT
A new loan has just been put up - due to begin on Tuesday afternoon.
Only the front page credit report available for now.
It only seems to have gone up in the last couple of hours - someone working late on a Saturday night.
EDIT: In the last 3 minutes, 3 people have independently posted the info about this loan appearing!
|
|