sqh
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Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Apr 29, 2015 17:27:54 GMT
I'd like AC to split this into two loans. One part would receive the reduced payment and the other part would get default interest until the shortfall is made up. Then allow both parts to continue trading.
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Post by bracknellboy on Apr 29, 2015 17:35:35 GMT
Loan #79 Trading Suspended. Borrower now has cashflow problems. Wants a reduced payment regime until autumn 2015. Not much trade expected for the summer season then! Cannot currently afford the interest payments. Come September, principal will need to be included in the payments too. Sincerely hope there wasn't some insider trading going on here - some higher than normal lumps of it were sold into my account last night. Probably just coincidence - a lender who was spooked by a 2-days late payment. Can't blame me: I sold out a month ago. I didn't like the look of the report that had been loaded up. When I say I sold out, I kept £1 as a token gesture. Why on earth I insist on such stupidity when I can get all the updates I need off this board is beyond me.
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kermie
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Post by kermie on Apr 29, 2015 19:08:33 GMT
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thebillet
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Post by thebillet on Apr 29, 2015 20:24:34 GMT
I sniffed around this loan recently, after all it is 14%, but on reading the last report and realising students will be rarer than hens' teeth until October I thought leave it, glad I did now.
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Post by Jack Barlow on Apr 29, 2015 22:22:56 GMT
Hopefully, it's a bit premature to have to start talking about the security for this loan, but I'm going to anyway because it highlights AC's flawed adaptation of the standard definition of LTV (Loan-To-Value) when applied to multiple assets where second charges are involved.
For this loan (of £440K), the security comprises:
- 1st charge over a commercial property valued at £650K
- 2nd charge over a BTL flat valued at £135K with prior charge of £97K
- 2nd charge over residential property valued at £350K with prior charge of £309K
AC have calculated the LTV as (Loan amount + all prior charges) / (total value of all properties) = (440+97+309)/(650+135+350) = 74.54%.
This formula and the resulting value are misleading if used as a measure of what the values of the properties could collectively fall to and still allow 100% recovery of AC lenders’ capital. This is because it incorrectly implicitly assumes that some of the 1st charges on the 2nd and 3rd properties could/would be repaid out of the realised value of the 1st property.
If we just assumed that the AC lenders’ security consisted of the commercial property with the 1st charge, then calculating the LTV in the standard way gives 440/650 = 67.69%. It’s illogical for AC to imply that the AC lenders’ LTV increases to 74.54% when more security is added. The anomaly occurs because the LTVs for the first-charge holders of the 2nd and 3rd properties (97/135=71.85% and 309/350=88.29% respectively) are larger than the AC lenders’ LTV on the 1st property alone.
I think it’s more meaningful to view the security for this loan as being a first charge on the commercial property giving loan cover of 1/67.69% = 1.48 times, which is potentially supplemented with security of (350+135-309-97)/440 = 0.18 times the loan amount associated with the 2nd charges on the two other properties.
Let's hope we don't need to test it!
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mikes1531
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Post by mikes1531 on Apr 29, 2015 23:16:30 GMT
I think it’s more meaningful to view the security for this loan as being a first charge on the commercial property giving loan cover of 1/67.69% = 1.48 times, which is potentially supplemented with security of (350+135-309-97)/440 = 0.18 times the loan amount associated with the 2nd charges on the two other properties. I also had questions about the meaning of the combined LTV when the first charges on the other two properties are so high relative to their value, but I wasn't sure what would be a better way to reflect the added value provided by the two second charges. Then again, how much value is the second charge holder likely to obtain in a case where the first charge represents a 88.3% LTV? IMHO, the answer is... nil! Firstly, once the recovery process starts, the borrower would stop making payments on the first charge loan. So by the time the property is sold, the LTV of the first charge probably would be in excess of 90%. And the remaining costs of the receivership and sale, not to mention the discount to 'value' that probably would be required to expedite the sale, likely would consume any remaining equity. About the only thing that might rescue the situation would be a significant increase in value between the time of the initial valuation and the eventual sale. But with inflation being as low as it is, and the time elapsed since the valuation being as short as it is, I don't think I'd expect AC to be able to extract anything from that property.
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Post by Jack Barlow on Apr 30, 2015 0:34:30 GMT
mikes1531, I share your sentiments. I was careful to use the words "potentially supplemented with" when referring to the 2nd charge security!
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iren
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Post by iren on Apr 30, 2015 17:11:58 GMT
I sold out when the accounts were uploaded, with the trigger to have a look at what was going on being my purchase of several tranches of this loan in which I'd previously had a sub £10 holding.
It's a downside of the Assetz system that people can sell on after seeing bad news, to others who placed buy targets before seeing the news. I'd prefer it if any update would automatically trigger the "manual invest disabled" function for all those with buy targets, with users having to manually re-enable before buying continues. It's one thing to be in a loan that experiences bad news; it's another thing to find you've bought into a loan only because it's experienced bad news and without having received any of the prior interest payments to set off against possible loss.
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sqh
Member of DD Central
Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Apr 30, 2015 18:57:55 GMT
I sold out when the accounts were uploaded, with the trigger to have a look at what was going on being my purchase of several tranches of this loan in which I'd previously had a sub £10 holding. It's a downside of the Assetz system that people can sell on after seeing bad news, to others who placed buy targets before seeing the news. I'd prefer it if any update would automatically trigger the "manual invest disabled" function for all those with buy targets, with users having to manually re-enable before buying continues. It's one thing to be in a loan that experiences bad news; it's another thing to find you've bought into a loan only because it's experienced bad news and without having received any of the prior interest payments to set off against possible loss. With c.35% of lender money tied up in disabled loans, the last thing I want is more reasons to disable loans. If AC restored the discounting mechanism we could trade loans at fair value based on the information available. Of course it will only work for truly manual investing. It worked really well on the previous software. Those lenders who wanted out could sell, and those who wanted premium rates could buy. The SM for impaired loans was liquid and underwriters often sold new loans at a discount.
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iren
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Post by iren on Apr 30, 2015 20:44:03 GMT
Just to clarify, I wasn't suggesting that trading in the loan itself should be disabled. Just that the same function to disable purchases could be triggered as is available to the lenders on each loan, which an individual lender can then continue to switch on and off themselves.
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sqh
Member of DD Central
Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
Posts: 1,428
Likes: 1,212
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Post by sqh on Apr 30, 2015 21:19:32 GMT
Just to clarify, I wasn't suggesting that trading in the loan itself should be disabled. Just that the same function to disable purchases could be triggered as is available to the lenders on each loan, which an individual lender can then continue to switch on and off themselves. Sorry, I didn't read your previous post properly. Yes, I agree with your suggestion. It's also a necessary step towards manual investing of discounted loans.
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Post by oldnick on Jul 16, 2015 18:04:49 GMT
I sold out when the accounts were uploaded, with the trigger to have a look at what was going on being my purchase of several tranches of this loan in which I'd previously had a sub £10 holding. It's a downside of the Assetz system that people can sell on after seeing bad news, to others who placed buy targets before seeing the news. I'd prefer it if any update would automatically trigger the "manual invest disabled" function for all those with buy targets, with users having to manually re-enable before buying continues. It's one thing to be in a loan that experiences bad news; it's another thing to find you've bought into a loan only because it's experienced bad news and without having received any of the prior interest payments to set off against possible loss. With c.35% of lender money tied up in disabled loans, the last thing I want is more reasons to disable loans. If AC restored the discounting mechanism we could trade loans at fair value based on the information available. Of course it will only work for truly manual investing. It worked really well on the previous software. Those lenders who wanted out could sell, and those who wanted premium rates could buy. The SM for impaired loans was liquid and underwriters often sold new loans at a discount. The converse of that situation of bad news causing a sell off, and some lenders inadvertently picking up loan parts they would no longer want if they'd been appraised of the change in circumstances, is if the news is ambiguous, or lenders just interpret it differently - some choose to buy while others choose to sell. If a buy order is put on hold until manually reset an optimistic buyer might miss out on a flurry of selling if they weren't viewing the website at the time. And who's to say what constitutes bad news - some lenders are attracted to a riskier loan in anticipation of a higher interest rate being applied. But anyway, it's voting time. Will student numbers, and the Aberystwyth economy, ever pick up enough to right this ship? I paid a visit to the town, and to the restaurant, at the beginning of June, out of curiosity. From a completely unrepresentative sample of the owner of a B&B and a student staying on to do a PHd there, it emerged that most fingers of blame are pointed at the outgoing (leaving, that is - not extroverted) Chancellor of the University, who was accused of making the students' lives less pleasant (making them study?), which had affected the popularity rating of the institution. The residents are hoping that the new chancellor can be prevailed upon by local worthies and tradesmen to restore the Golden Goose to its former egg laying form.
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Post by oldnick on Jul 16, 2015 20:16:48 GMT
Here's hoping you opted for the lobster thermidor washed down with a bottle Dom Perignon... and a round for everyone present (and an extra bottle to take away for the PHD student) What's your policy on tipping? I did indeed push the boat out and can recommend the restaurant if you're in the area. It was also heartening to see work well in hand to restore the sea front bandstand that was undermined by those ferocious storms last year.
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Post by jevans4949 on Jul 17, 2015 22:51:20 GMT
I went into this one, and have stayed in, with my minimal share.
With regard to the LTV, etc., my concern was that the value of the premises seems to be for a going concern. Given the problems the borrower has already had, and the fact that pubs across the land have been struggling in general, if it came to selling the place, it might not be as a going concern, in which case it would be unlikely to reach the given valuation.
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sqh
Member of DD Central
Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Jul 17, 2015 23:12:28 GMT
I went into this one, and have stayed in, with my minimal share. With regard to the LTV, etc., my concern was that the value of the premises seems to be for a going concern. Given the problems the borrower has already had, and the fact that pubs across the land have been struggling in general, if it came to selling the place, it might not be as a going concern, in which case it would be unlikely to reach the given valuation. I think the interest rate reflects the possibility of the building being sold without a trading business. However, the owners aren't going to let that happen, they have run the business for years and their own home is also part of the security. If things got really bad I would expect the owners to sell their home and live in the hotel.
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