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Post by MrHappyGoLucky on Sept 24, 2017 19:06:18 GMT
Interesting article from The Telegraph. www.telegraph.co.uk/business/ 2017/09/23/ The link has been removed because it is against the rule here that discloses the borrowers. But you should be able to Google it easily, also there is already a dicussion here on Lendy board. |
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stokeloans
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Post by stokeloans on Sept 24, 2017 19:14:42 GMT
If you're investing in P2P, especially property loans , this shouldn't come as a surprise.
It's a volatile market with inexperienced/incompetent/unscrupulous players
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Post by martin44 on Sept 24, 2017 22:13:29 GMT
If you're investing in P2P, especially property loans , this shouldn't come as a surprise. It's a volatile market with inexperienced/incompetent/unscrupulous playersAnd that only covers the platforms...  whereas the borrowers......... 
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yangmills
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Post by yangmills on Sept 25, 2017 7:54:08 GMT
Investors in these loans have nothing to complain about.
In a world where the risk free rate is close to zero, you are being offered something that yields 12% but with asset security. That's twice the yield on unsecured senior junk rated bonds, 4x the yield on US investment grade corporate bonds, 10x the 10-year gilt yield. Of course for short periods, market and regulatory inefficiencies can allow some outsize returns but that won't last forever. Eventually something has to knock returns down to more realistic levels. The two parameters to do that are a) high default probability b) low recovery rate. Probably both.
The alternative is to believe that P2P is somehow 'special'; that it can generate a return to risk ratio that no other asset class can. We can put that thought process in the same category as thinking that par is somehow fair value for all loans over their lifetime. Or that valuations calculated from the residual method in a speculative property development might be valid in a distressed sale scenario. It's all just akin to magical thinking. You might aswell believe there are fairies at the bottom of my garden.
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locutus
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Post by locutus on Sept 25, 2017 8:21:27 GMT
Investors in these loans have nothing to complain about. In a world where the risk free rate is close to zero, you are being offered something that yields 12% but with asset security. That's twice the yield on unsecured senior junk rated bonds, 4x the yield on US investment grade corporate bonds, 10x the 10-year gilt yield. Of course for short periods, market and regulatory inefficiencies can allow some outsize returns but that won't last forever. Eventually something has to knock returns down to more realistic levels. The two parameters to do that are a) high default probability b) low recovery rate. Probably both. The alternative is to believe that P2P is somehow 'special'; that it can generate a return to risk ratio that no other asset class can. We can put that thought process in the same category as thinking that par is somehow fair value for all loans over their lifetime. Or that valuations calculated from the residual method in a speculative property development might be valid in a distressed sale scenario. It's all just akin to magical thinking. You might aswell believe there are fairies at the bottom of my garden. I wouldn't normally even think about contradicting you yangmills and I certainly don't believe in fairies at the bottom of the garden but is it possible you're not comparing like for like here? The other investment options you mention differ from P2P in one way (I'm referring to the 12%+ platforms) and that is institutional money. Whilst those other investment options are awash with billions of pounds, it is very easy for the industry to establish the real risk curve and price accordingly. However, that institutional money is not currently present in 12%+ P2P platforms which often price to lender demand rather than risk. I'm of the mind that because of the stage of the lifecycle we're in, the options are not completely comparable and that there are some genuinely mispriced bargains available for us retail investors.
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Post by chielamangus on Sept 25, 2017 8:32:21 GMT
Investors in these loans have nothing to complain about. In a world where the risk free rate is close to zero, you are being offered something that yields 12% but with asset security. That's twice the yield on unsecured senior junk rated bonds, 4x the yield on US investment grade corporate bonds, 10x the 10-year gilt yield. Of course for short periods, market and regulatory inefficiencies can allow some outsize returns but that won't last forever. Eventually something has to knock returns down to more realistic levels. The two parameters to do that are a) high default probability b) low recovery rate. Probably both. The alternative is to believe that P2P is somehow 'special'; that it can generate a return to risk ratio that no other asset class can. We can put that thought process in the same category as thinking that par is somehow fair value for all loans over their lifetime. Or that valuations calculated from the residual method in a speculative property development might be valid in a distressed sale scenario. It's all just akin to magical thinking. You might aswell believe there are fairies at the bottom of my garden. On the contrary, investors have plenty to complain about if they are given false information. As for your belief that all returns come back to "realistic levels" - what I might term a normal return in the long run - this ignores the fact that life is a series of short runs, with investors hopping from one investment curve to another, and many people do earn more than what you might call a realistic level. In fact, I thought in another thread elsewhere that you revealed you had achieved just that. It is important to differentiate between what the long run average return might be and what individuals get. Of course, the corollary is that some will achieve less than the average. Losses on investments are hardly news, though.
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Post by peerlessperil on Sept 25, 2017 8:51:10 GMT
Investors in these loans have nothing to complain about. In a world where the risk free rate is close to zero, you are being offered something that yields 12% but with asset security. That's twice the yield on unsecured senior junk rated bonds, 4x the yield on US investment grade corporate bonds, 10x the 10-year gilt yield. Of course for short periods, market and regulatory inefficiencies can allow some outsize returns but that won't last forever. Eventually something has to knock returns down to more realistic levels. The two parameters to do that are a) high default probability b) low recovery rate. Probably both. The alternative is to believe that P2P is somehow 'special'; that it can generate a return to risk ratio that no other asset class can. We can put that thought process in the same category as thinking that par is somehow fair value for all loans over their lifetime. Or that valuations calculated from the residual method in a speculative property development might be valid in a distressed sale scenario. It's all just akin to magical thinking. You might aswell believe there are fairies at the bottom of my garden. A 3rd parameter of course is competition. The platforms appear to be struggling on the origination front - either because the borrowers aren't there, or because the supply of money to p2p has increased. How do you attract more borrowers? - You can offer a higher LTV
- Turn a blind eye to borrower's history
- Offer a lower rate
All 3 appear to be happening (and always have, it's just more prevalent now?). The LTV numbers may not have changed on the surface, but there have always been ways and means to obtaining the valuation you need. I was relatively late to the p2p scene (although not credit) and it does look to me that a 12% loan today is of lower quality than a 12% loan a few years back? Clearly lenders were taking greater platform risk in the early days, but I think the shift is greater than that, and the supernormal returns yangmills refers to have already passed? Those with more experience may care to comment on their perception? Has loan quality declined, or now that we have some recoveries to examine is it just more obvious how unprepared the platforms are?
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yangmills
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Post by yangmills on Sept 25, 2017 9:10:50 GMT
locutus chielamangusSorry don't mind me. It's a grey Monday morning and I'm feeling particularly bitter and twisted. Worse the lawnmower man has just decapitated all the fairies on the back lawn. The girls will be really upset when they get back from school ...
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duck
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Post by duck on Sept 25, 2017 9:12:35 GMT
I was relatively late to the p2p scene (although not credit) and it does look to me that a 12% loan today is of lower quality than a 12% loan a few years back? .... I'm not certain that is correct. There have always been 'bargepole' loans (some of which never got funded and were pulled from the platform) the difference that I now see is that the pot of available investor funds is larger and loans that I wouldn't go near are filling fast. There is also the time factor. Most new platforms have a honeymoon period where they can declare 'no defaults' but most of the well used sites are now past that period so the defaults are showing. Since platforms differ when they formally default loans there is not an easy way to project what the future holds for each individual platform.
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shimself
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Post by shimself on Sept 25, 2017 9:51:48 GMT
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bababill
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Post by bababill on Sept 25, 2017 9:54:12 GMT
I think that the article is partially trying to assert that the background of the borrower does matter.
I recall another very intelligent poster saying that the manpower/IBM loan (referenced in the Telegraph article) is a solid loan and has good security and the background of the borrower does not matter.
Unfortunately, I can't find this post as seems to have been deleted.
In my humble opinion the background of the borrower is important; good borrowers hopefully reduce likelihood of default.
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ben
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Post by ben on Sept 25, 2017 9:58:42 GMT
I think that the article is partially trying to assert that the background of the borrower does matter. I recall another very intelligent poster saying that the manpower/IBM loan (referenced in the Telegraph article) is a solid loan and has good security and the background of the borrower does not matter. Unfortunately, I can't find this post as seems to have been deleted. In my humble opinion the background of the borrower is important; good borrowers hopefully reduce likelihood of default. The background of the borrower is just as important as the asset, no point having a good asset and a borrower that has no intention of repaying/walking away if it goes bad.
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oldgrumpy
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Post by oldgrumpy on Sept 25, 2017 10:29:01 GMT
PBL064 - Tenanted Office Block, Somerset
Aug 2, 2016 at 11:15am SteveT, huxs, and 7 more like this
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Post by savingstream on Aug 2, 2016 at 11:15am
The property on which our loan is secured on is sound and so is the valuation which the valuer reconfirmed just before we completed on the loan.
We have evidence of the rents being paid by all tenants including those associated with the borrower at the time i.e they are real.
Our company is in very regular comms with the borrower and our Loan Redemptions Manager is happy with progress being made either by refinance or sale.
We have asked for the valuer to review his valuation which was made last year and update with regards tenancies and rents being paid.
We will not comment on the borrower's personality or background, neither of which are relevant to his capacity to repay our loan.
Really? I suggest they are relevant to his intention to repay the loan, but try telling Lendy that!
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ben
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Post by ben on Sept 25, 2017 12:09:47 GMT
Indeed. They are also relevant when I consider if a borrower is trying to make a loan look better than it really is. Going to be a few tears at the end of this loan, unfortunately unless Lendy get a good result on this loan (which is unlikely) they will basically turn into a ponzi scheme. New loans paying of the losses of old loans. Which is a shame as even though they had some appalling loans they have had some very good loans.
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oldgrumpy
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Post by oldgrumpy on Sept 25, 2017 12:39:12 GMT
locutus chielamangus Sorry don't mind me. It's a grey Monday morning and I'm feeling particularly bitter and twisted. Worse the lawnmower man has just decapitated all the fairies on the back lawn. The girls will be really upset when they get back from school ... ...time to get some chocolate in before they return! 
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whereas the borrowers......... 
