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Post by marc77 on Oct 5, 2016 18:07:21 GMT
Hi mikes1531 - so I think the thought process is logical, that's a sensible hypothesis to make. I'd be asking myself though, do I want 13% secured by something where a new type of venture has to succeed according to my hypothesis (for which several assumptions must be true; or it succeeds due to other reasons), or say 8% where a residential house has to be renovated and sold in a town with 5 comparable properties sold on rightmove within 1/4 mile within the last 12 months? I see the former as the risk profile of equity with the reward profile of debt. One thing I did see (thanks to sqh ) is that on the planning application there was a complaint that the applicant had massively overstated how many people currently visit the site (in order to make the argument that there would now be fewer but in more high end accommodation thus planning permission should be granted). |
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Post by baggiesman on Oct 6, 2016 19:32:53 GMT
My view also. I am constantly staggered that some potential lenders seem to carp about individual loans without simply taking the view that they can duck those with which they have an issue. 'Caveat emptor' etc. Obviously, if many start to find significant problems on a particular platform it becomes an issue. The fact isthat FS loans are only for 6 months and lenders do not have to renew if the borrower extends. The longer term valuation is not usually relevant and the borrower will often obtain development finance or longer mortgage facilities in due course.
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ben
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Post by ben on Oct 6, 2016 20:07:46 GMT
My view also. I am constantly staggered that some potential lenders seem to carp about individual loans without simply taking the view that they can duck those with which they have an issue. 'Caveat emptor' etc. Obviously, if many start to find significant problems on a particular platform it becomes an issue. The fact isthat FS loans are only for 6 months and lenders do not have to renew if the borrower extends. The longer term valuation is not usually relevant and the borrower will often obtain development finance or longer mortgage facilities in due course. I am quite happy for people to carp on about loans as some have local knowledge I do not, none of these loans are ever in an area I am from. However I personally only invest in a loan that I would be happy to hold if the borrorower defaults, i.e the security appears sufficient and the chances are there will be someone willing to take it over. Which unfortuntly with most of FS loans are not the case, so you are basically gambling if the borrorower can make good on his plans or not. To assume that you will be able to exit or the borrorower will obtain development finance is pretty short sighted. If they can great, but plan for the worse case.
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Post by martin44 on Oct 6, 2016 21:57:01 GMT
My view also. I am constantly staggered that some potential lenders seem to carp about individual loans without simply taking the view that they can duck those with which they have an issue. 'Caveat emptor' etc. Obviously, if many start to find significant problems on a particular platform it becomes an issue. The fact isthat FS loans are only for 6 months and lenders do not have to renew if the borrower extends. The longer term valuation is not usually relevant and the borrower will often obtain development finance or longer mortgage facilities in due course. Herein lies the problem , an increasing number of borrowers (even the no issue loans) at FS are neither renewing or extending or 'paying up' so if you feel confident to hold to term, expecting either payment or extension , you are going to be sorely disappointed , if you have used the SM, then well done, if not, then cross your fingers and toes.
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phil
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Post by phil on Oct 7, 2016 16:45:47 GMT
My view also. I am constantly staggered that some potential lenders seem to carp about individual loans without simply taking the view that they can duck those with which they have an issue. 'Caveat emptor' etc. Obviously, if many start to find significant problems on a particular platform it becomes an issue. The fact isthat FS loans are only for 6 months and lenders do not have to renew if the borrower extends. The longer term valuation is not usually relevant and the borrower will often obtain development finance or longer mortgage facilities in due course. Herein lies the problem , an increasing number of borrowers (even the no issue loans) at FS are neither renewing or extending or 'paying up' so if you feel confident to hold to term, expecting either payment or extension , you are going to be sorely disappointed , if you have used the SM, then well done, if not, then cross your fingers and toes. I'm sorry, I can't quite see what your concern is. Looking at the active and past loans there's a total of 863 loans of which just 10 loans are currently in default. Just 5 loans are showing as defaulted/completed and the sold assets didn't fully recover the debt. There's around 48 loans that defaulted and capital and interest was recovered in full. In short, currently out of 863 loans just 5 loans have made a loss and just ten loans are currently in default, surely that's an excellent record thus far?
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Post by martin44 on Oct 7, 2016 18:18:55 GMT
Herein lies the problem , an increasing number of borrowers (even the no issue loans) at FS are neither renewing or extending or 'paying up' so if you feel confident to hold to term, expecting either payment or extension , you are going to be sorely disappointed , if you have used the SM, then well done, if not, then cross your fingers and toes. I'm sorry, I can't quite see what your concern is. Looking at the active and past loans there's a total of 863 loans of which just 10 loans are currently in default. Just 5 loans are showing as defaulted/completed and the sold assets didn't fully recover the debt. There's around 48 loans that defaulted and capital and interest was recovered in full. In short, currently out of 863 loans just 5 loans have made a loss and just ten loans are currently in default, surely that's an excellent record thus far? I haven't checked your figures but i am more than sure you will be correct, the problem IMHO is that the vast majority of the past loans were small, easily realizable pawn items, an awful lot of the present loans are property bridging and development funding loans, with many having what i consider to be very generous valuations, more loans than i feel comfortable with are reaching their completion dates and entering into extended time, this again is to be expected with property bridging, what concerns me is that the true LTV of all of these loans is higher due to the fact that final payment is the 70% LTV loan amount plus the interest plus any other fees which we may or may not know about, the loans are not extended with interest payed by the borrower, the interest just racks up , adding to the debt. I do not wish to see any loan default, but unfortunately i am already stuck in 3 with 2 others not looking too clever. Everyone will have their own opinion on risk and diversity, for me FS going forward do not suit my risk profile, BTW i sincerely hope i'm wrong and wish FS all the best for the future, as i am on my way out.
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ben
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Post by ben on Oct 7, 2016 20:27:29 GMT
I am not out of FS, but I do pick my loans plenty of loans I ignore and I invest a lot less then I would in other platforms. I have only invested in a few loans that have excelent security and even then in a default situation I am not sure that FS has the necassory competencey to deal with the situation. They moved to fast from pawn to property and a lot of the loans appear to be taking whatever they can. A defaulted property loan will cause a lot more work then a defaulted pawn item and with the ways there fees work who is going to pay for the legal work? A couple of difficult defaults and it could quite quickly wipe out FS working capital due to legal fees.
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Post by Deleted on Oct 7, 2016 22:18:30 GMT
I am not out of FS, but I do pick my loans plenty of loans I ignore and I invest a lot less then I would in other platforms. I have only invested in a few loans that have excelent security and even then in a default situation I am not sure that FS has the necassory competencey to deal with the situation. They moved to fast from pawn to property and a lot of the loans appear to be taking whatever they can. A defaulted property loan will cause a lot more work then a defaulted pawn item and with the ways there fees work who is going to pay for the legal work? A couple of difficult defaults and it could quite quickly wipe out FS working capital due to legal fees. Why don't you open a new dedicated thread? What has this to do with the Isle of Wight loan? And most of all: what information do you have about the FS working capital or legal fees? Every single P2P Platform has legal fees which are not low at all in any case (even without defaults in the middle). So I don't get why you think FS is any worse than SS or MT or Collaeral etc.
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phil
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Post by phil on Oct 8, 2016 6:14:32 GMT
phil I haven't checked your figures but i am more than sure you will be correct, the problem IMHO is that the vast majority of the past loans were small, easily realizable pawn items, an awful lot of the present loans are property bridging and development funding loans, with many having what i consider to be very generous valuations, more loans than i feel comfortable with are reaching their completion dates and entering into extended time, this again is to be expected with property bridging, what concerns me is that the true LTV of all of these loans is higher due to the fact that final payment is the 70% LTV loan amount plus the interest plus any other fees which we may or may not know about, the loans are not extended with interest payed by the borrower, the interest just racks up , adding to the debt. I do not wish to see any loan default, but unfortunately i am already stuck in 3 with 2 others not looking too clever. Everyone will have their own opinion on risk and diversity, for me FS going forward do not suit my risk profile, BTW i sincerely hope i'm wrong and wish FS all the best for the future, as i am on my way out. I agree, 70% LTV interest rolled up loans on speculative developments aren't for the faint hearted. On the bright side, of the 280 currently active loans only half are property loans which still leaves an equal split between property/non-property in the past six months. As for your view that "more loans than i feel comfortable with are reaching their completion dates and entering into extended time, this again is to be expected with property bridging", my view is that it's simply not the case. About half of current defaulted loans are property which matches the fact that about half of the active loans are property. So property, at the moment, is not showing more of a default risk than non-property. Having said that, it will be very interesting over the next year to see how the current plethora of speculative land loans bear out 
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arbster
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Post by arbster on Oct 8, 2016 6:27:02 GMT
On the bright side, of the 280 currently active loans only half are property loans which still leaves an equal split between property/non-property in the past six months. Not by value though, I'm sure. About half of current defaulted loans are property which matches the fact that about half of the active loans are property. So property, at the moment, is not showing more of a default risk than non-property. With property, it does tend to be a whole lot more difficult to realise 70% of the "value" in reasonable timescales. I've been surprised and delighted at FS's recovery performance with non-property defaults, and neither of those regarding property...
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phil
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Post by phil on Oct 10, 2016 16:24:56 GMT
On the bright side, of the 280 currently active loans only half are property loans which still leaves an equal split between property/non-property in the past six months. Not by value though, I'm sure. About half of current defaulted loans are property which matches the fact that about half of the active loans are property. So property, at the moment, is not showing more of a default risk than non-property. With property, it does tend to be a whole lot more difficult to realise 70% of the "value" in reasonable timescales. I've been surprised and delighted at FS's recovery performance with non-property defaults, and neither of those regarding property... According to Fitch ratings, residential property that has been repossessed goes at about 23% below market value, I should have thought it reasonable to expect the residential offerings from FS to achieve similar sales prices. Even at the depth of the recession in 2008/9 residential repossessions were well under 1% of mortgaged properties, I don't see why residential housing repossesions should be significantly higher than that within FS platform in the current economic climate. Some development loans based on optimistic valuations may turn out to lose a significant amount of capital but I'd generally regard established bricks and mortar properties a reasonably secure investment. As for non-property loans being less than half in value, that's wholly academic. The point is that the property loans aren't there instead of non-property loans, the property loans are there in addition to the non-property loans which enables investors willing to take a gamble on property to achieve 13+% returns on large sums of money. That's why the BHs bung in £100k, they're not going to get in £100k on someone's railway set, are they?
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baldpate
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Post by baldpate on Oct 10, 2016 17:08:58 GMT
I'm not convinced that people who previously had the money to take their holidays abroad, but now find it unaffordable or poor value, will necessarily be the type of people who want to holiday in this sort of facility.
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mikes1531
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Post by mikes1531 on Oct 12, 2016 0:50:02 GMT
With property, it does tend to be a whole lot more difficult to realise 70% of the "value" in reasonable timescales. I've been surprised and delighted at FS's recovery performance with non-property defaults, and neither of those regarding property... According to Fitch ratings, residential property that has been repossessed goes at about 23% below market value, I should have thought it reasonable to expect the residential offerings from FS to achieve similar sales prices. Even at the depth of the recession in 2008/9 residential repossessions were well under 1% of mortgaged properties, I don't see why residential housing repossesions should be significantly higher than that within FS platform in the current economic climate. Some development loans based on optimistic valuations may turn out to lose a significant amount of capital but I'd generally regard established bricks and mortar properties a reasonably secure investment. : Are the Fitch statistics reporting the top-line price agreed? Or the bottom-line net proceeds? If the former, then by the time the estate agent fees, lawyers' fees, LPA receivers' fees, etc., etc., are included, it wouldn't surprise me in the least if a sale at 23% of market value would produce net proceeds of less than 70% of market value. There's also the issue of accrued interest. A property with a 70% LTV FS loan that managed to produce net proceeds of 70% of the value would allow FS investors to recover their capital but none of the accrued interest. Do the Fitch statistics include any indication of the typical/average time to achieve a sale?
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nick
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Post by nick on Oct 12, 2016 8:37:50 GMT
As a rule of thumb I assume a 25% discount on forced sale plus 5% legal/receiver fees. Actual recovery rates will obviously vary significantly depending on the type and location of property. In this context a 70% LTV is always quite high and there is likely some risk of a capital shortfall in the event of repossession, particularly in a stagnant/falling market. The following article is a bit dated, but is an interesting read and provides indicative market discounts for repossessed properties in the 2008-2013 period. The discounts are a lot higher than I would have expected given that house prices only really fell in 2009 but show strong growth for 2010-13: www.mortgagefinancegazette.com/market-news/arrears/repossessed-properties-sell-for-60-70-per-cent-of-true-market-value-05-08-2014/ |
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guff
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Post by guff on Oct 12, 2016 10:04:44 GMT
I'm not convinced that people who previously had the money to take their holidays abroad, but now find it unaffordable or poor value, will necessarily be the type of people who want to holiday in this sort of facility. The EasyJet/Ryanair flights from Bristol to Alicante might change your mind.
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