oldgrumpy
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Post by oldgrumpy on Oct 23, 2014 11:55:38 GMT
I think Ratesetter sell-out fees should be waived (or minimal) when whole portfolios have to be sold quickly in order to administer a deceased person's estate. Maybe Ratesetter can confirm here what the policy is in those circumstances.
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pikestaff
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Post by pikestaff on Oct 23, 2014 13:53:40 GMT
I think their FAQ implicitly answers that: they don't.
Whether they should is another matter. In my view it's only fair that the true cost of selling out (any shortfall between the book value of the loans and what they can be re-sold for) is borne by the estate. However, I'd like any charges on top of that to be waived
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oldgrumpy
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Post by oldgrumpy on Oct 23, 2014 13:57:00 GMT
I think their FAQ implicitly answers that: they don't. Whether they should is another matter. In my view it's only fair that the true cost of selling out (any shortfall between the book value of the loans and what they can be re-sold for) is borne by the estate. However, I'd like any charges on top of that to be waived Agree with that
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Post by GSV3MIaC on Oct 23, 2014 14:09:09 GMT
Not sure why you think an estate should get any different treatment .. I would suggest that the cost of anyone getting out should be the true cost of placing the loans with a new lender, if possible. Borrowers don't even have that restriction! What we need is a secondary market, perhaps.
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oldgrumpy
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Post by oldgrumpy on Oct 23, 2014 14:28:06 GMT
Not sure why you think an estate should get any different treatment .. I would suggest that the cost of anyone getting out should be the true cost of placing the loans with a new lender, if possible. Borrowers don't even have that restriction! What we need is a secondary market, perhaps. Only if the charges are made particularly high to (rightly) prevent people gaming the system, e.g investing at 5 year rate and getting out after (say 2). Anyone who dies is not playing the system, so only true costs of new loan placement should be applied.
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sl75
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Post by sl75 on Oct 23, 2014 14:36:50 GMT
I think Ratesetter sell-out fees should be waived (or minimal) when whole portfolios have to be sold quickly in order to administer a deceased person's estate. Maybe Ratesetter can confirm here what the policy is in those circumstances. I have to admit a lot of ignorance in the matter (having not yet been closely involved in such matters), but my understanding was that the income and repayments would continue to accrue to the estate, and that there would be no obligation for the executor to sell them at all, let alone "quickly", unless obliged to by the terms of the deceased person's will.
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pikestaff
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Post by pikestaff on Oct 23, 2014 16:24:09 GMT
I have to admit a lot of ignorance in the matter (having not yet been closely involved in such matters), but my understanding was that the income and repayments would continue to accrue to the estate, and that there would be no obligation for the executor to sell them at all, let alone "quickly", unless obliged to by the terms of the deceased person's will. That's right, but it would be a pain if you had to let the administration of the estate run for 5 years in order to collect all the debts. There is a similar issue with bad debts on other platforms, and I wish platforms offered a facility to dispose of bad debts (if only by giving them to charity) to facilitate the windng up of an estate. @gsv3miac: I think you are saying the same as me . As oldgrumpy alludes to, RS's charges are set way over the true cost, in order to prevent people gaming the system. It's this excess that should be waived on death.
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Post by GSV3MIaC on Oct 23, 2014 16:32:05 GMT
I was saying I think the costs should be waived ANYWAY .. selling up (if someone is willing to buy and you agree a price) is a zero sum game, with little scope for 'gaming it', and I don't see why RS should get in the way, beyond whatever the cost is for changing the lender name in the database. I can't really make a good case for special deals for the deceased. 8>.
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Post by pepperpot on Oct 23, 2014 17:26:49 GMT
I was saying I think the costs should be waived ANYWAY .. selling up (if someone is willing to buy and you agree a price) is a zero sum game, with little scope for 'gaming it', and I don't see why RS should get in the way, beyond whatever the cost is for changing the lender name in the database. I can't really make a good case for special deals for the deceased. 8>. If that were the case, why would anyone take part in the 3yr market, if it's possible be in RS at 5yr rates and sell up after 3 with very little penalty?
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Post by GSV3MIaC on Oct 23, 2014 17:30:17 GMT
You don't know what the penalty will be .. if interest rates rise a lot, you might have to sell at a 20% discount to find a buyer.
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niceguy37
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Post by niceguy37 on Oct 24, 2014 9:00:47 GMT
I was saying I think the costs should be waived ANYWAY .. selling up (if someone is willing to buy and you agree a price) is a zero sum game, with little scope for 'gaming it', and I don't see why RS should get in the way, beyond whatever the cost is for changing the lender name in the database. I can't really make a good case for special deals for the deceased. 8>. If that were the case, why would anyone take part in the 3yr market, if it's possible be in RS at 5yr rates and sell up after 3 with very little penalty? Isn't this pretty much how the monthly market works? If you wish to withdraw from the monthly market then your monthly loans to a set of borrowers are passed on to other lenders. Everyone gets a fair deal and is happy. Perhaps if people lent for 5 years and tried to sell on their loan parts after 3 years then interest rates will have gone up, and there will be an funding gap to be paid - that is a risk - but the market would be more efficient.
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pikestaff
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Post by pikestaff on Oct 24, 2014 9:30:02 GMT
You don't know what the penalty will be .. if interest rates rise a lot, you might have to sell at a 20% discount to find a buyer. That's a fair point, but valuing the option is difficult - far too difficult for the vast majority of investors. Having considered all the posts on this thread I am coming to the view (which is not quite where I started) that: - As well as being liable for any loss on sale, sellers should keep any profit. It is unfair that RS should keep the profit. Also, if sellers keep the profit, it neutralises the option valuation problem.
- The retrospective penalty is necessary to prevent gaming the system, but it should be capped for each individual loan part at an amount equal to all future interest on that loan part. This would keep the penalty proportionate where there are only a few months left.
- If these changes led RS to double their minimum charge from the current 0.25% I could live with that. Much more transparent and honest. (They might need need to raise the minimum charge by a lot more to be income neutral, but that would give away the size of the secret profits they have been making and I don't think the market would stand it.)
I would waive the retrospective penalty on death. Few people will go that far in order to game the system!
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sl75
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Post by sl75 on Oct 24, 2014 10:13:43 GMT
You don't know what the penalty will be .. if interest rates rise a lot, you might have to sell at a 20% discount to find a buyer. That's a fair point, but valuing the option is difficult - far too difficult for the vast majority of investors. Having considered all the posts on this thread I am coming to the view (which is not quite where I started) that: - As well as being liable for any loss on sale, sellers should keep any profit. It is unfair that RS should keep the profit. Also, if sellers keep the profit, it neutralises the option valuation problem.
- The retrospective penalty is necessary to prevent gaming the system, but it should be capped for each individual loan part at an amount equal to all future interest on that loan part. This would keep the penalty proportionate where there are only a few months left.
- If these changes led RS to double their minimum charge from the current 0.25% I could live with that. Much more transparent and honest. (They might need need to raise the minimum charge by a lot more to be income neutral, but that would give away the size of the secret profits they have been making and I don't think the market would stand it.)
I would waive the retrospective penalty on death. Few people will go that far in order to game the system! Regarding the "profit on sale" (in cases where interest rates have fallen), my understanding is that this goes to the lucky buyer, who gets a contract rate in excess of their offer, not to RS. Your idea of capping each individual loan part's exit fee at an amount equal to all future interest sounds great in principle for exiting the rump of an investment that is now only returning "a trivial amount not worth bothering with". In practice, however, this would only work if the £10 minimum for a saleable portion were also dropped, as many loans will have dropped below this level later in their term (especially those that started off quite small as they were from re-investment of interest). ... which brings us back to the problem an executor may face - unless they're very lucky, they cannot use the sellout function to allow the estate account to be closed earlier, as some of the loan parts will be below £10 and thus not able to be sold by that route. Whether RateSetter have some other function they can use in an "emergency" would presumably be a matter for anyone involved in such an "emergency" to deal with. I'd guess P2P needs to be considered in similar terms to other non-liquid assets that can continue to provide income for years after death... although I'm not familiar with the specifics of how those would be handled (e.g. music/book royalties?)
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pikestaff
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Post by pikestaff on Oct 24, 2014 10:35:19 GMT
...Your idea of capping each individual loan part's exit fee at an amount equal to all future interest sounds great in principle for exiting the rump of an investment that is now only returning "a trivial amount not worth bothering with". In practice, however, this would only work if the £10 minimum for a saleable portion were also dropped, as many loans will have dropped below this level later in their term (especially those that started off quite small as they were from re-investment of interest). ... which brings us back to the problem an executor may face - unless they're very lucky, they cannot use the sellout function to allow the estate account to be closed earlier, as some of the loan parts will be below £10 and thus not able to be sold by that route. Whether RateSetter have some other function they can use in an "emergency" would presumably be a matter for anyone involved in such an "emergency" to deal with. I'd guess P2P needs to be considered in similar terms to other non-liquid assets that can continue to provide income for years after death... although I'm not familiar with the specifics of how those would be handled (e.g. music/book royalties?) One of the problems is that RS will not transfer the contracts to another name, eg that of one or more beneficiaries under the will. I don't know if there is a compelling legal reason for that, or if they just can't be bothered (or will not commit publicly to do so). But perhaps p2p ISAs will eventually give us a solution of sorts. In the post ISA world it may become the norm for p2p investments to be held via a nominee account (as happens for stocks and shares ISAs today). If the contracts with borrowers were in the name of (say) RS Nominees Ltd then it would be easy for RS to change the beneficial owner, in accordance with the executor's instructions. My stocks and shares ISA is with TD Direct, who specifically allow this: "If the Executor or Beneficiary has a Trading Account we can accept a written instruction to transfer cash and assets that we hold on behalf of the Estate to the new account...".Obviously, this would require a beneficiary willing to hold the investments. Regardless of the above, there should definitely be a way of disposing of small balances and closing an account.
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