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Post by Ace on Apr 23, 2018 23:59:18 GMT
I thought it might be too good to be true that AC had a new loan at 9%!!!
How is it possible for loans #304 and #708 to be considered as such similar risks that investors are now being asked to underwrite #708 for the same rate of return as #304?
Granted that the loans are to the same borrower and are secured against the same asset, but the risk profiles are massively different.
#304 gets a first charge over the security asset with an LTV of 73%.
#708 gets a second charge over the same asset with an LTV of 75%.
In case it's not obvious: if the borrower defaults and the security is sold for 73% of it's LTV (after subtracting fees). Lenders in #304 would get a full refund of capital and lenders in #708 would get nothing! If that doesn't deserve a higher rate I'm not sure what does!
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stub8535
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personal opinions only. Not qualified to advise on investment products.
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Post by stub8535 on Apr 24, 2018 6:10:39 GMT
I thought it might be too good to be true that AC had a new loan at 9%!!! How is it possible for loans #304 and #708 to be considered as such similar risks that investors are now being asked to underwrite #708 for the same rate of return as #304? Granted that the loans are to the same borrower and are secured against the same asset, but the risk profiles are massively different. #304 gets a first charge over the security asset with an LTV of 73%. #708 gets a second charge over the same asset with an LTV of 75%. In case it's not obvious: if the borrower defaults and the security is sold for 73% of it's LTV (after subtracting fees). Lenders in #304 would get a full refund of capital and lenders in #708 would get nothing! If that doesn't deserve a higher rate I'm not sure what does! Could it be that AC have assessed the value of the property to be higher now, than in 2016 when the valuation was done, and decided the ltv is sufficiently low to justify the same ltv? No evidence of value uplift as cost to loan ratio would be high is probably the reason for no valuation report in this case. I am with you though, Ace, in thinking a higher rate for a second charge would be better but, with the low loan amount, it will easily fill anyway.
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ashtondav
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Post by ashtondav on Apr 24, 2018 6:32:46 GMT
Any property loan over 70% is pure speculation. And at 9% is not worthy of consideration. As for the same rate for a first and second charge - we’ll it’s strange....
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Apr 24, 2018 10:07:26 GMT
Time, and the change in the lending market that goes with it, I suspect is the reason both loans are at 9%. Had the original loan been launched now rather than in 2016, when AC market rates were considerably higher, I suspect it would be at a lower rate.
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registerme
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Post by registerme on Apr 24, 2018 10:08:14 GMT
Well, unless I am missing something, one thing that's confusing is that the "title page" for the loan calls it a second charge, whilst the credit report calls it a first charge. I'll raise it with support, in the meantime chris it'd be good if you could get somebody to look at it too. OK, I'm not missing anything. The discrepancy has been raised to the credit team. |
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