blender
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Post by blender on Jan 1, 2018 10:46:24 GMT
It's the classic false positive vs false negative problem. FC could do more to prevent bad borrowers getting through, but it would likely result in rejecting more of the good loans and result in increased fees to pay for the additional DD, neither of which is good for FC's business. Far easier to get early failures to as low as reasonably practicable, then price the rates good borrowers pay so as to achieve reasonable overall yield. Human nature is to be loss averse, and we tend to take losses from dodgy borrowers personally, even though a well diversified lender is almost certainly earning a positive return, and most lenders will be earning at least the target return. FC have likely improved their processes, but they are in an arms race, as their fraud detection improves, the dodgy borrowers invent new ways to circumvent them. Bear in mind FC have also introduced higher risk bands, with corresponding higher rates, since the early days. True as far as it goes. What you haven't mentioned is the pedestrian approach historically adopted by FC towards bad debts which reached its nadir with the dud series of London loans where hundreds of thousands of pounds have been lost. Initially long suffering investors were given every excuse under the sun for doing precisely nothing useful for well over a year. Two years on with the loans in long-term administration and still no resolution. It was mighty convenient for FC to blame a useless now defunct property division of their organisation for the failures when in fact the buck should have stopped where it belonged at the top of the management chain. They were appallingly slow to get a grip on an out of control situation. With investment comes risk but the whole point of secured investments is to hedge against such disasters. FC by presenting such rubbish loans pitched inexperienced investors into quagmires from which no meaningful financial recovery is likely. Agreed. There was a particular organisational problem with property, in that the property team were allowed to deal with delayed repayment, by supervising or providing the refinance. The collections and recoveries team did not take the key role. I think that led to the risk that the property team would always be too keen to help the borrower in keeping going in some way, and were always going to do everything they could to avoid calling a loss. On those London loans the property team went along with the borrower, when perhaps the collections and recovery team would have stopped further credit on the 'security' offered.
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Post by brightspark on Jan 1, 2018 17:47:35 GMT
OK but the buck stops at the Board. At that level they cannot dot every i and cross every t but they must have known pretty early on that there was a systemic disaster in the offing. Their (non) admission was pulling out of property loans. No apology. No we seem to have got this one wrong but we will now do everything in our power to sort things out. Simply pass the buck to the Administrators whose salaries are effectively being paid by the same suckered lenders. It does make me angry!
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adrian77
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Post by adrian77 on Jan 2, 2018 6:59:38 GMT
FC had a good business idea they were quick off the block and built up a large portfolio -
so credit to them for that.
What I don't credit them with is the way they have built up this mountain of debt as they seem to prioritise getting the volume of loans onto their books at the cost of quality. Granted most of us will probably have made a bit with FC (as I have) but some of us are going to take a big hit
with problematic property loans which look to me as if FC have lamentably failed to manage properly. Such loans not already defaulted will probably be re-financed by under the bonnet re-issues which will drag down the overall return rate as lenders have exactly zero say as to where their money goes. The current FC portfolio strikes me as little better than a glorified junk bond which over the next few years is going to return a lot less than the predicted rate as the number of defaults seems to be constantly rising and at the same time more and more companies are entering this market.
I have no idea as to whether FC simply planned to get a large portfolio at any cost so they can float and cash in. Whatever I have 100% lost confidence in FC and wonder just how valuable their loan book actually is.
I was also angry but sold up and now just feel disappointed as I really liked FC when it first started but that business model now seems 1 million miles away
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Post by captainconfident on Jan 2, 2018 11:15:24 GMT
adrian77 Where did you move you move your FC money to, if you don't mind me asking? Most of the 'mature' platforms I use now have a degree of problem loans (Ly, TC, FC etc), it's just a case of not yet knowing how acute that degree will eventually turn out to be.
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adrian77
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Post by adrian77 on Jan 2, 2018 11:48:52 GMT
For the record I have put money into Funding Secure and Assetz - but still very careful when
investing in property loans with them. At least I can select my own investments!
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Post by captainconfident on Jan 2, 2018 13:00:05 GMT
Quite, although finding the Scottish manor house and golf course was 19% of my GBBA on AC was a kick up the arse. I've never studies FS, but have always had the most 'select own investments' fun on FK, where the secondary market has remained a happy playground even since new loans stopped. In my view, all FK need to do is restart without changing anything on the site, and they would mop up the FC refugees by the thousand. My fear is that they go with the tide and relaunch as a black box clone.
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