poppyland
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Post by poppyland on Jan 21, 2018 0:06:55 GMT
There's been some discussion on the general P2P chat about what platform failure might mean for investors, and so I wondered what people think of the FAQ answer on FS which is as follows:
What if FundingSecure runs into financial difficulties?
If FundingSecure enters into financial difficulties, it will initiate a wind-down plan whereby no new loans or investors would be taken on and the loan book would be run-down. We have worked with the FCA to develop this plan, as well as the financial indicators that would cause us to initiate the plan. This is all designed to ensure a smooth and timely wind-down of the business if required.
In the unlikely event that FundingSecure enters administration as a result of extreme financial circumstances, capital and accrued interest on all loans would be “ring-fenced” and, therefore, cannot be used by the administrators to settle any debts due by FundingSecure. The administrators would have to rely on the administration fees coming at the end of the loan period to settle all debts, continuing to repay capital and interest to investors in accordance with the terms and conditions.
I thought this looked pretty good, but as someone pointed out, if a company friendly to FS were appointed as administrators, there might be opportunities to screw the investors over - hopefully not though.
I must say, though, that FS seems one of the least likely platforms to go under, as they seem to have plenty of loans on offer, and judging by the lightening speed with which good looking new loans get snapped up, plenty of investors too.
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mikes1531
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Post by mikes1531 on Jan 21, 2018 5:02:08 GMT
"... and the loan book would be run-down." If the administrator of the wind-down plan is as effective at dealing with the loan book as FS seem to be at dealing with it, the wind-down plan for the portfolio of 6-month loans could go on for years.
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jj
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Jolly Jammy
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Post by jj on Jan 21, 2018 9:28:05 GMT
I would have thought that FS would be the least likely to fail. Lets Consider the way it gets paid. A loan is paid along with interest at term so it is in their interest to get (good) loans that pay back.
Now lets consider other platforms that get paid upfront. It is in their interest to get the loan drawndown. This is where the big pay day happens. After that a minimal % for maintaining the loan. So the incentive is not the quality of loan but which one would be drawndown. Ask yourself how many loans get drawndown on FS compared to MT/ABL/COL ?
Now I know this opinion is inflammatory but I invoke my right to it. Time will tell.
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poppyland
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Post by poppyland on Jan 21, 2018 9:29:07 GMT
If the administrator of the wind-down plan is as effective at dealing with the loan book as FS seem to be at dealing with it, the wind-down plan for the portfolio of 6-month loans could go on for years.
This is probably true. From my 2 years in P2P I've seen that once a loan of any kind runs into problems, it can take an extremely long time to sell it. This seems to me the biggest risk in P2P - that your money ends up sunk in investments that drag on for ages, with no guarantee of any interest at all, or even capital returns at the end. The property business just isn't a fast moving one unless you're selling at a huge discount.
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poppyland
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Post by poppyland on Jan 21, 2018 9:36:50 GMT
I would have thought that FS would be the least likely to fail. Lets Consider the way it gets paid. A loan is paid along with interest at term so it is in their interest to get (good) loans that pay back the loan. Now lets consider other platforms that get paid upfront. It is in their interest to get the loan drawndown. This is where the big pay day happens. After that a minimal % for maintaining the loan. So the incentive is not the quality of loan but which one would be drawndown. Ask yourself how many loans get drawndown on FS compared to MT/ABL/COL ? Now I now this opinion is inflammatory but I invoke my right to it. Time will tell. I think this is a very good analysis. It's obviously a lot better when the interests of the platform owners coincide with the interests of the lenders.
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mikes1531
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Post by mikes1531 on Jan 21, 2018 18:47:23 GMT
I would have thought that FS would be the least likely to fail. Lets Consider the way it gets paid. A loan is paid along with interest at term so it is in their interest to get (good) loans that pay back. Do we know that FS take no fees at all at the time a loan is made. It's obviously a lot better when the interests of the platform owners coincide with the interests of the lenders. I think this is the biggest problem in the P2P world. The only incentive platforms seem to have is to keep losses low enough that they don't lose their investor support. So if they can defer their losses long enough to get the platform to the point that the founders can exit -- Bob's your uncle!
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littleoldlady
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Running down all platforms due to age
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Post by littleoldlady on Jan 22, 2018 8:13:45 GMT
I would have thought that FS would be the least likely to fail. Lets Consider the way it gets paid. A loan is paid along with interest at term so it is in their interest to get (good) loans that pay back.
Now lets consider other platforms that get paid upfront. It is in their interest to get the loan drawndown. This is where the big pay day happens. After that a minimal % for maintaining the loan. So the incentive is not the quality of loan but which one would be drawndown. Ask yourself how many loans get drawndown on FS compared to MT/ABL/COL ? Now I know this opinion is inflammatory but I invoke my right to it. Time will tell. You would think so, but a brief look at their loan history shows that they seem to be willing to lend to any charlatan with a good story. So I deduce that their strategy is to maximise the number of loans so they make a profit on the ones that repay and as for those that don't - well it's no skin off their nose.
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