dandy
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Post by dandy on May 16, 2018 12:35:08 GMT
This seems to reflect a misunderstanding of the AC provision fund. For the QA and 30 day accounts the provision fund (or cash float) trades in suspended loans, so an investment into these accounts will involve purchasing a share of of these loans. Equally, on withdrawal, the pf takes back a share of the suspended loans. If all funds were withdrawn from QA or 30 day, all suspended holdings would be available to cash out. The higher paying investment accounts are different, the pf only pays out when all forms of recourse are exhausted, ie can - kick - long -road. I have reduced confidence in RS, the provision fund remains underfunded relative to target and the rolling market changes are evidence of a system under stress. The 5yr rates are too low considering the risks & the inevitability of a recession in the next 5 yrs. Hi Dave I dont think I have misunderstood. AFAIK the access accounts PF has not paid out on anything (other than interest) - it merely "ringfences" some of the PF to cover expected losses on suspended loans. If you have such confidence in the PF then perhaps you can enlighten me to its size? Or how much capital it has paid out? I agree RS is not very attractive now. However to complain about an underfunded RS PF (that has paid out 100% immediately 100% of the time) yet somehow like the AC PF is totally beyond my comprehension. Sorry.
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happy
Member of DD Central
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Post by happy on May 16, 2018 15:53:09 GMT
This seems to reflect a misunderstanding of the AC provision fund. For the QA and 30 day accounts the provision fund (or cash float) trades in suspended loans, so an investment into these accounts will involve purchasing a share of of these loans. Equally, on withdrawal, the pf takes back a share of the suspended loans. If all funds were withdrawn from QA or 30 day, all suspended holdings would be available to cash out. The higher paying investment accounts are different, the pf only pays out when all forms of recourse are exhausted, ie can - kick - long -road. I have reduced confidence in RS, the provision fund remains underfunded relative to target and the rolling market changes are evidence of a system under stress. The 5yr rates are too low considering the risks & the inevitability of a recession in the next 5 yrs. Hi Dave I dont think I have misunderstood. AFAIK the access accounts PF has not paid out on anything (other than interest) - it merely "ringfences" some of the PF to cover expected losses on suspended loans. If you have such confidence in the PF then perhaps you can enlighten me to its size? Or how much capital it has paid out? I agree RS is not very attractive now. However to complain about an underfunded RS PF (that has paid out 100% immediately 100% of the time) yet somehow like the AC PF is totally beyond my comprehension. Sorry. I think you will find that when it comes to property development loans (something RS is doing more and more of but they don't tell us how much) the RS PF works pretty much as the AC one does but RS hold the defaulted loan on its live loans book, not in the PF as it does with consumer loans. This means when you invest new money in RS now you could be buying into defaulted development loans withou knowing it just like the QAA and 30 Day accounts. Why have RS done this? Because their relatively small PF would be wiped out if it had to pay out on just a few defaulting development loans. The RS PF model would never work on a loan book of just a few hundred big loans, that's why they are different. EDIT And thats why RS have changed theirs for thier bigger loans.
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jlend
Member of DD Central
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Post by jlend on May 16, 2018 19:31:44 GMT
Hi Dave I dont think I have misunderstood. AFAIK the access accounts PF has not paid out on anything (other than interest) - it merely "ringfences" some of the PF to cover expected losses on suspended loans. If you have such confidence in the PF then perhaps you can enlighten me to its size? Or how much capital it has paid out? I agree RS is not very attractive now. However to complain about an underfunded RS PF (that has paid out 100% immediately 100% of the time) yet somehow like the AC PF is totally beyond my comprehension. Sorry. I think you will find that when it comes to property development loans (something RS is doing more and more of but they don't tell us how much) the RS PF works pretty much as the AC one does but RS hold the defaulted loan on its live loans book, not in the PF as it does with consumer loans. This means when you invest new money in RS now you could be buying into defaulted development loans withou knowing it just like the QAA and 30 Day accounts. Why have RS done this? Because their relatively small PF would be wiped out if it had to pay out on just a few defaulting development loans. The RS PF model would never work on a loan book of just a few hundred big loans, that's why they are different. EDIT And thats why RS have changed theirs for thier bigger loans. RS have published info on how the number of property loans has increased and what % it is now. You can find it on here invest.ratesetter.com/invest/investing-with-us/I think they were quite clear when they made the change regarding the property loans. The property loans are asset backed unlike their consumer loans. It makes sense for them to consider the asset when considering the strength of the PF. I personally do not have a problem with this. It will be interesting to see what happens with the PF coverage ration following the change to the MR in June. The coverage ratio is higher than it has been for some time at 124% - hopefully it will continue to rise towards the top end of their target range as we may be in for a difficult few years in the wider economy at some stage in the future.
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Post by propman on May 18, 2018 10:46:26 GMT
I think you will find that when it comes to property development loans (something RS is doing more and more of but they don't tell us how much) the RS PF works pretty much as the AC one does but RS hold the defaulted loan on its live loans book, not in the PF as it does with consumer loans. This means when you invest new money in RS now you could be buying into defaulted development loans withou knowing it just like the QAA and 30 Day accounts. Why have RS done this? Because their relatively small PF would be wiped out if it had to pay out on just a few defaulting development loans. The RS PF model would never work on a loan book of just a few hundred big loans, that's why they are different. EDIT And thats why RS have changed theirs for thier bigger loans. RS have published info on how the number of property loans has increased and what % it is now. You can find it on here invest.ratesetter.com/invest/investing-with-us/I think they were quite clear when they made the change regarding the property loans. The property loans are asset backed unlike their consumer loans. It makes sense for them to consider the asset when considering the strength of the PF. I personally do not have a problem with this. It will be interesting to see what happens with the PF coverage ration following the change to the MR in June. The coverage ratio is higher than it has been for some time at 124% - hopefully it will continue to rise towards the top end of their target range as we may be in for a difficult few years in the wider economy at some stage in the future.
It concerns me that the PF is paying interest on the outstanding property loans and it is difficult to know the quantum. I also believe that they have refinanced loans otherwise in default. This is done purely for optics as the interest paid will massively exceed the returns on the "cash" PF. I would prefer it if they paid out the loans from the PF and included the expected repayments due from recovering on their security in expected future income to the PF (ideally providing info on the amounts concerned). I suspect that the rise in 1 year rates (the main market for property loans) at the back end of last year may have included much of these rollovers, this appears a little Ponsiist to me!
Re the coverage, therir appears to have been a sale of loans held by the PF (cash inflow into PF with little change in defaults). When this happened before, initially they acknowledged a decrease in the expected recoveries from the defaulted loans which is netted off expected future defaults. This lead to greater expected defaults and a reduction in the coverage ratio. Worryingly this was largely reversed over the next couple of months. We have no info on the defaulted loanbook retained by the PF. It would be good to know this and the expected recoveries built into the figures. I think that the latter should be shown as PF income NOT reduced defaults as the most significant issue is cashflow for the PF rather than whole of life solvency. This is because this is what would trigger withholding payments to top the fund up and the crisis in confidence that would destroy RS's business model. In addition, it seems wrong the reduce the denominator (expected defaults) of the ratio as these would need to be funded.
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