sapphire
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Post by sapphire on Jan 29, 2018 8:19:19 GMT
Two of my loans are overdue in the past month, for ostensibly different reasons - a brief summary is below.
1. When the borrower says they are in the process of refinancing or want to repay, how long does FS typically wait for this to take place before taking some decisive action?
As there is no penal rate of interest for delays in repayment of the FS loans, presumably some of the borrowers may be playing the system to their advantage.
I realise FS are probably reluctant to declare a default early to keep their stats looking healthy. But surely the more they delay, the more the interest racks up and in the event the loan does go sour and recovery action needs to be taken, the sooner FS acts, the better it is in the lenders interest?
2. Are there any reasons why or situations when a delay in initiating action / recovery is to the lender's advantage?
3. Does FS owe a duty of responsibility/care to their lenders to initiate prompt action?
Summary of two recent overdue loans:
A. 1st Charge B*********** (8010286828) was due on 23 Due 2017 and the FS update of 12 Jan states "Refinance is still ongoing"
B. S******** Property - Renewal (1913068877) was due on 31 Dec 2017 and FS has two updates:
"12/01/2018 Borrower has been in contact and confirmed intention to renew - funds awaited."
"21/01/2018 We are in contact with borrower, chasing overdue interest."
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SteveT
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Post by SteveT on Jan 29, 2018 8:33:02 GMT
1) I've a handful of loans that are now well over 600 days active (so 18 months or so overdue) and are still awaiting long-promised refinance / repayment (no Receivers yet involved)
2) Almost inevitably, a property sold off by Receivers tends to realise much less than one sold in normal circumstances. When the borrower is communicating openly and FS believe they still have a credible plan for refinance / repayment, they tend to give them a lot of time to get it finalised, hoping to avoid a loss for lenders. In some cases this proves successful (ie. repayment in full with all accrued interest), in others not (ie. Receivers called in much too late and property sold at a significant loss)
3) Yes, but it's always going to be a judgement call. If they pull the plug sooner than needed and trigger a loss that might have been avoided by an eventual refinance, how is that meeting a "duty of care"?
A month overdue is nothing on FS !
(ps I'm in 8010286828 too, and will be quite happy to see that one run as long as it likes, within reason. In fact, I'd prefer that it renew a couple of times before repaying!)
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locutus
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Post by locutus on Jan 29, 2018 8:58:12 GMT
As there is no penal rate of interest for delays in repayment of the FS loans, presumably some of the borrowers may be playing the system to their advantage. FS do charge penalty interest.
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sapphire
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Post by sapphire on Jan 29, 2018 10:31:11 GMT
FS do charge penalty interest. According to FS they do not charge any penalty interest. (There is no mention of penalty interest in section 6 of their T&Cs which covers "Repayments, Defaults and Renewals". Per section 6.2.4 of the T&Cs in the event of the asset sale, FS charge an additional administration fee of 5% all of which is retained by FS.)
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locutus
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Post by locutus on Jan 29, 2018 10:34:34 GMT
sapphire Their borrower contract includes an option to impose penalty interest in the event of a default. This is discretionary.
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sapphire
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Post by sapphire on Jan 29, 2018 10:45:20 GMT
sapphire Their borrower contract includes an option to impose penalty interest in the event of a default. This is discretionary. Thanks for the info. Any idea how often so far have FS actually exercised this discretion? When the discretion is exercised, presumably the full amount of the delta penalty interest rate is retained by FS as the lender T&Cs do not provide any right for the lenders to share in this higher penalty rate of interest?
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sapphire
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Post by sapphire on Jan 29, 2018 10:55:35 GMT
Just to add that some other providers *mandatorily* charge a Penalty rate for a delayed repayment which is shared with the lenders.
e.g. Proplend charge an extra 20% of the normal rate of interest. 90% of this excess is passed on to the lenders.
I think FS should consider doing something similar.
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locutus
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Post by locutus on Jan 29, 2018 11:29:32 GMT
Thanks for the info. Any idea how often so far have FS actually exercised this discretion? When the discretion is exercised, presumably the full amount of the delta penalty interest rate is retained by FS as the lender T&Cs do not provide any right for the lenders to share in this higher penalty rate of interest? No idea how often it is applied and lenders to not share the penalty interest if it is triggered.
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blender
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Post by blender on Jan 29, 2018 11:48:07 GMT
As a matter of principle, interest always goes to the lenders, otherwise it is not interest but fees. This is fundamental to p2p. A cynic might say that the operator will be keen to add fees, to cover their extra costs in administering the loan, but not so keen to increase interest to increase the debt to lenders.
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Post by brightspark on Jan 29, 2018 20:57:04 GMT
How long does FS wait on overdue loans before taking action? As a lender on a certain powerboat loan I would opine that the answer is that there is no answer. An alternative answer is forever.
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bugs4me
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Post by bugs4me on Jan 30, 2018 11:59:11 GMT
How long does FS wait on overdue loans before taking action? As a lender on a certain powerboat loan I would opine that the answer is that there is no answer. An alternative answer is forever. The powerboat is a good example although AFAIK not formally defaulted. I can top that with the South Wales loan which is defaulted and has been outstanding for 900 plus days.
If you have time on your hands then just read the updates for this loan!!!
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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 Jan 30, 2018 18:02:24 GMT
No messing about with Loan 2805000793 (Cornwall Farmland) which has repaid in full today, capital and interest. The renewal date was 28th May 2017 and FS called in the receivers within 6 weeks. It seems the borrower had no tall stories to offer, which left FS with a simple decision.
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SteveT
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Post by SteveT on Jan 30, 2018 18:18:32 GMT
I suspect they’re also quicker to press the button on a forced asset sale when the odds of a full recovery look good. Where it’s obvious that a forced sale will see a significant shortfall, the tendency instead is to “wait and hope”. Not that there isn’t some logic in this, up to a point.
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Monetus
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Post by Monetus on Feb 3, 2018 23:18:37 GMT
The answer? Forever.
Just browsing through some current investments and we've got 500 days, 600 days, 450 days overdue...
Don't expect swift recovery action. Your money will be locked up and inaccessible for as long as they feel like it.
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duck
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Post by duck on Feb 4, 2018 7:21:18 GMT
The answer? Forever. ...... Disagree. I have several loans where action (formal defaulting & receivers appointed) has happened promptly. I also have several loans that have not been defaulted but are long past term. What you and I don't have is the full picture. Is the promised refinance likely or is it just pie in the sky? Has proof of means/method of repayment been seen? If receivers/administrators are appointed what are the costs likely to be? Will the costs and value realised from distressed sale wipe out monies owed to investors? Whilst there have been a couple of well documented failures of the 'system' I would much prefer a platform to operate on a loan by loan basis as opposed to a blanket '2 weeks late = receivers appointed' type policy. Now Monetus should I like my post? 
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