TitoPuente
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Post by TitoPuente on Jul 10, 2015 13:48:04 GMT
14141 went in what? 45 seconds?
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TitoPuente
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Likes: 655
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Post by TitoPuente on Jul 9, 2015 14:13:15 GMT
There are basically two types of A-pluses: Property and non-property. The property ones have asset security (you can learn the details in the reports published by FC). The other type is the usual unsecured loan which is rated A+ who knows why (some say it is because they have the lowest expected bad debt rate, although this is still not clear).
In general, it is overall beneficial to buy discounted parts if the rate satisfies you and your DD indicates that there is nothing fishy with the loan payment history and with the borrower and their business.
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TitoPuente
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Post by TitoPuente on Jul 8, 2015 11:37:51 GMT
9149 a week late. No comment.
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TitoPuente
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Post by TitoPuente on Jul 8, 2015 11:32:55 GMT
I am all for a W band, as in W**ga. MBR would be 2,375.3% Is there any P2P platform doing payday?
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TitoPuente
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Post by TitoPuente on Jul 8, 2015 10:56:33 GMT
For property loans financing cost is as key as in any other business. Property loans in FC are broken into tranches because they have trouble to fill at the given fixed rate. If they were offered as an auction there would be no need for tranches so there would be no issue with unknown future financing costs. I'm not sure I follow... Suppose a borrower requires the following financing (numbers and timings purely illustrative and made up off the top of my head, but broadly following a similar sequence to what I've seen on some multi-tranche developments): January: £800,000 to buy the land and commence groundworks (perhaps split into two £400,000 tranches listed sequentially for convenience, as FC's inflexible systems only allow full early repayment of an entire tranche). May: £400,000 to commence the initial construction of the building once groundworks are completed. August: £400,000 to finish off the construction of the building and commence fitting it out. November: £400,000 to finish off fitting apartments within the building to a satisfactory standard so that sales can occur. £2,000,000 total estimated funding requirement, with drawdowns spread over several months, and later tranches often contributed to by lenders who were not even members at the point the first tranche drew down (or who otherwise missed the opportunity the first time round). How does your proposal fix the rate for the subsequent tranches? Is the borrower expected to purchase the property and commence groundworks in January with absolutely no idea what the cost of funding will be for the remaining £1.2M? Do you expect borrowers to pay interest on funds they will not be in a position to draw down for several months? Do you expect lenders to commit to lend money several months into the future? Conceptually, I don't see why a business investing in machinery or a developer investing in property would have different rights. FC is not offering project finance, is offering something akin to corporate debt. The tranche approach is just a way to mimic project finance with the big difference that it does not have commitment from the lenders (i.e. lending in the first tranche does not create a commitment to lend in the subsequent tranches). So it is expected that tranches, which are no more than series of independent loans, would attract different interest from lenders. Trying to fix the rate is a makeshift way to bridge the gap. And in many cases does not work. In a market without FC going out to save failing tranches, a property borrower should have to borrow all at once, at market rate, and then administer the funds as they see fit.
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TitoPuente
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Post by TitoPuente on Jul 7, 2015 13:39:12 GMT
The obvious natural market alternative would be to let bidders bid what they think the loan is worth. For some reason Faucet Clogged is stubborn with their fixed pricing for property loans. A truly natural market would be two sided, with the borrowers also participating in determining the market rate. I'm not entirely sure that the "lenders bid a rate and borrowers have to take it or leave it" method is necessarily any more "natural" than "borrowers set a rate and lenders have to take it or leave it"... Either way, one or other party is left with a "take it or leave it" deal and no real power to negotiate. For a property loan, the borrower needs to plan the development on the basis of a known cost of funding. Who on earth would enter into a multi-million pound development with only the terms of an initial small first tranche agreed, and absolutely no idea of the cost of funding of the subsequent tranches? In your proposed solution, what is the borrower supposed to do when, due to a large amount of activity on the marketplace at the time their second (or third, or fourth...) tranches are in auction, they're left at an unacceptably high cost of funding - having made plans on the basis of being able to borrow at 8% (plus arrangement fees), it's probably not economical to borrow at up to 15%, nor to leave the project half-completed. Neither is it likely to be convenient to source funding from any other lender (who would probably not offer very good terms whilst subordinated to FC lenders, and thus would need to lend a large amount in order to take out the FC loan too). Well, the market is not limited to FC only. It is the entire SME lending market. Within FC borrowers do participate in the auctions by presenting their case and answering questions. They have that opportunity and some of them use it well while many others are just passive rate takers. If FC would eliminate (or significantly widen) the max and min rates, good borrowers would benefit from being able to push down the rate by defending their case. For property loans financing cost is as key as in any other business. Property loans in FC are broken into tranches because they have trouble to fill at the given fixed rate. If they were offered as an auction there would be no need for tranches so there would be no issue with unknown future financing costs.
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TitoPuente
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Post by TitoPuente on Jul 7, 2015 11:50:47 GMT
I'm sure that the borrowers don't consider that anything is "wrong" with their loans reaching MBR! No, I'm sure they don't... It's far more likely to be the level of that MBR. 18.2%, when a week ago they couldn't even have started the auction north of 15%, and the worst possible MBR was 12.2%... What is wrong is the system. When 100% of the outcomes are concentrated in one extreme of the scale, maybe the problem is the scale? Is it possible to expect that if they reduced the E loans MBR to, say 14%, such loans would fill at a higher than MBR? Somewhere between 14% and 18%. Would this be a fair pricing? On the same token, is it also likely that if large property deals would have a variable rate, they would all fill at a market rates instead of ending in a propping up scenario or cancelled altogether?
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TitoPuente
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Post by TitoPuente on Jul 7, 2015 8:02:36 GMT
Haven't all of the E loans so far closed at MBR? In the other bands, a majority of smaller loans are also closing at MBR. What's wrong? I don't think the problem is the MBR rigidity per se. I think that the bottom line is that at this point Fictitious Conundrum is struggling to bring enough deal flow to the amount of capital that is pouring in on the lender side.
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TitoPuente
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Post by TitoPuente on Jul 7, 2015 7:41:45 GMT
Their options are very limited. This is the fifth tranche and as they start it they need about another £1M for this project and are committed to fund it on their balance sheet if it will not go with lenders/underwriters. They took a chunk of the fourth tranche, also with 2% cash back. I think the idea is just to spin it out with smaller sequential loans and hope to get more lender cash later, or delay taking it on their balance sheet. It may not work, but they have very little alternative. The obvious natural market alternative would be to let bidders bid what they think the loan is worth. For some reason Faucet Clogged is stubborn with their fixed pricing for property loans.
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TitoPuente
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Post by TitoPuente on Jul 2, 2015 14:45:53 GMT
13924 is a victim of this shambolic risk banding. It could have been an A+. I doubt it will be accepted even at MBR. I said above that it could be taken early because of lack of scope for improvement. But they are not answering the questions and if unhappy with the banding the cash could be locked up for a week and then rejected. There is always the scenario in which they will draw down as soon as it fills because they are desperate for the cash for a reason not immediately evident in the papers. If this is the case, then it will be an E after all.
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TitoPuente
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Post by TitoPuente on Jul 2, 2015 13:53:11 GMT
13924 is a victim of this shambolic risk banding. It could have been an A+. I doubt it will be accepted even at MBR.
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TitoPuente
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Post by TitoPuente on Jul 1, 2015 11:03:15 GMT
If autobid is not going to autobuy E loan parts, then the flipping thesis for E-bands would rely solely on manual bidders. Would this be enough market? or E-bands would become like property A-pluses that sell slower than they mature? Flipping relies solely on manual bidders on most occaisions anyway; as autobid doesn't buy anything with a premium. You are absolutely right. My concern was more related to offloading parts after a certain holding period, at par. I should not have labeled that as flipping.
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TitoPuente
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Post by TitoPuente on Jul 1, 2015 10:33:39 GMT
I can see the E market being a re-run of the early C- loans, all going at minimum and being offered on the SM at below minimum. With an 18.2 min though I could well imagine them selling at 3% markup till the volume (and first defaults) come through. They should be a money spinner for a while, unless you have to blink of course - this one only lasted 4 minutes by the look of it. Edit; speaking of volume... no. 2 just listed. If autobid is not going to autobuy E loan parts, then the flipping thesis for E-bands would rely solely on manual bidders. Would this be enough market? or E-bands would become like property A-pluses that sell slower than they mature?
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TitoPuente
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Post by TitoPuente on Jun 19, 2015 12:39:00 GMT
Truly exceptional.
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TitoPuente
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Post by TitoPuente on Jun 18, 2015 15:44:29 GMT
There is an ever increasing amount of dumb money coming in to P2P platforms seeking yield and low correlation with other asset classes. I say dumb money because I cannot get my head around how someone can bid 6-7% (after fees) for any unsecured loan, even if diversification is considered as the Holy Grail of downside protection.
It's a market and we'll see what happens when the results after fees and bad debt come in the sub 5% range and interest rates start to go up.
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