bg
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Post by bg on Jul 30, 2018 11:07:43 GMT
to a point I would agree but I would say being late in a development is one thing if ,like me, you only deal in cash and have additional readies in the bank. If you are like some of these borrowers who seem to have no cash and facing compulsory strike off etc then if you are left repaying e.g. £40K pcm in interest charges being late is not ideal - in fact (and I have the t-shirt) a complete disaster! Maybe there is a reason why most developers can't borrow anywhere else apart from FS or similar. If I went to my bank manager and asked him to fund some of these speculative developments that FS have done he would ask my wife if I had stopped taking the tablets... Being late in repayment of development and bridge loans is par for the course. The best course of action is not to call the receivers in and immediately go for a forced sale. That will result in a bad outcome for everyone most of the time. The best course of action is to assess the situation and to work with the borrower to find a solution. This takes time. Banks do not go for repossession as soon as you miss a mortgage payment, they work to find a solution. Likewise with bridge loans, they try and avoid a forced sale of the asset - over 50% of bridge loans run over term, even with banks. That said some of the FS updates are ludicrous....clearly they have some loans with serious problems - but they have the option of either crystallising a massive loss for investors now or trying to get a better outcome. I think most people would go for the latter. What they really need now are some actual repayments. They need to show investors they can deal with these situations or they are in big trouble.
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adrian77
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Post by adrian77 on Jul 30, 2018 11:19:55 GMT
true but if the loan is a no-hoper then they risk a massive increase in interest owing that wipes out any second or third charges in the hope the loan comes good.
I think some of these loans are so problematic the only option is to cut their (our!) losses rather than have another Whitehaven on their hands - to me this is far too risky for my shekels. I would rather have 50% of my investment recovered in the short term than possibly 65% in the long term.
I may be wrong and this is why I am doing my FS league so I/we can get a definitive list of how well or how badly FS loans perform.
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michaelc
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Post by michaelc on Jul 30, 2018 12:19:01 GMT
to a point I would agree but I would say being late in a development is one thing if ,like me, you only deal in cash and have additional readies in the bank. If you are like some of these borrowers who seem to have no cash and facing compulsory strike off etc then if you are left repaying e.g. £40K pcm in interest charges being late is not ideal - in fact (and I have the t-shirt) a complete disaster! Maybe there is a reason why most developers can't borrow anywhere else apart from FS or similar. If I went to my bank manager and asked him to fund some of these speculative developments that FS have done he would ask my wife if I had stopped taking the tablets... Being late in repayment of development and bridge loans is par for the course. The best course of action is not to call the receivers in and immediately go for a forced sale. That will result in a bad outcome for everyone most of the time. The best course of action is to assess the situation and to work with the borrower to find a solution. This takes time. Banks do not go for repossession as soon as you miss a mortgage payment, they work to find a solution. Likewise with bridge loans, they try and avoid a forced sale of the asset - over 50% of bridge loans run over term, even with banks. That said some of the FS updates are ludicrous....clearly they have some loans with serious problems - but they have the option of either crystallising a massive loss for investors now or trying to get a better outcome. I think most people would go for the latter. What they really need now are some actual repayments. They need to show investors they can deal with these situations or they are in big trouble. I tend to like a lot of your posts bg but unfortunately I don't agree with this one. I have a friend who used to work for a money lender in the NW of england. He would/does lend mostly to property developers. One of the reasons my friend left was because he felt they were unethical in that the owner would tend to prefer a late payment or default as that gave him the opportunity to earn more from the loan and many otherwise successful businesses with short term cash flow issues went to the wall because of that. Of course, I don't know the terms of these loans nor what sort of LTV he was lending on but it shows it definitely isn't the case that all lenders will be happy to negotiate for long periods with difficult borrowers. One thing this has shown me is to concentrate on the quality of the security not too much on the borrower. The former can to some extent be quantified but the later is on a wing and a prayer based on track record which can be broken in an instant.
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bg
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Post by bg on Jul 30, 2018 12:25:07 GMT
Being late in repayment of development and bridge loans is par for the course. The best course of action is not to call the receivers in and immediately go for a forced sale. That will result in a bad outcome for everyone most of the time. The best course of action is to assess the situation and to work with the borrower to find a solution. This takes time. Banks do not go for repossession as soon as you miss a mortgage payment, they work to find a solution. Likewise with bridge loans, they try and avoid a forced sale of the asset - over 50% of bridge loans run over term, even with banks. That said some of the FS updates are ludicrous....clearly they have some loans with serious problems - but they have the option of either crystallising a massive loss for investors now or trying to get a better outcome. I think most people would go for the latter. What they really need now are some actual repayments. They need to show investors they can deal with these situations or they are in big trouble. I tend to like a lot of your posts bg but unfortunately I don't agree with this one. I have a friend who used to work for a money lender in the NW of england. He would/does lend mostly to property developers. One of the reasons my friend left was because he felt they were unethical in that the owner would tend to prefer a late payment or default as that gave him the opportunity to earn more from the loan and many otherwise successful businesses with short term cash flow issues went to the wall because of that. Of course, I don't know the terms of these loans nor what sort of LTV he was lending on but it shows it definitely isn't the case that all lenders will be happy to negotiate for long periods with difficult borrowers. One thing this has shown me is to concentrate on the quality of the security not too much on the borrower. The former can to some extent be quantified but the later is on a wing and a prayer based on track record which can be broken in an instant. Sorry, I don't follow. You're saying you don't agree because you think most lenders would push to default the loan and foreclose as it's the best way to make more fees?
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Godanubis
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Anubis is known as the god of death and is the oldest and most popular of ancient Egyptian deities.
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Post by Godanubis on Jul 30, 2018 12:39:06 GMT
I am thinking Proplend (if there were any investments available), and HNW (if you have a larger sum available), would free up loads of time in doing DD, investing, worrying, tracking and complaining on here, and still give a higher net rate. Yes the number of -1% loans seems to have increased dramatically recently. Oh dear! Proplend fees stop you making any money on SM as I currently have £300000 + up for sale their fees alone for selling are £1500 you would need to buy at substantial discount to make any profit . I can appreciate most folk don’t have time or inclination to spend on SM for those willing to put in the effort the returns can be greater but are always less risky if larger sums are not held to compleation
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michaelc
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Post by michaelc on Jul 30, 2018 13:05:58 GMT
I tend to like a lot of your posts bg but unfortunately I don't agree with this one. I have a friend who used to work for a money lender in the NW of england. He would/does lend mostly to property developers. One of the reasons my friend left was because he felt they were unethical in that the owner would tend to prefer a late payment or default as that gave him the opportunity to earn more from the loan and many otherwise successful businesses with short term cash flow issues went to the wall because of that. Of course, I don't know the terms of these loans nor what sort of LTV he was lending on but it shows it definitely isn't the case that all lenders will be happy to negotiate for long periods with difficult borrowers. One thing this has shown me is to concentrate on the quality of the security not too much on the borrower. The former can to some extent be quantified but the later is on a wing and a prayer based on track record which can be broken in an instant. Sorry, I don't follow. You're saying you don't agree because you think most lenders would push to default the loan and foreclose as it's the best way to make more fees? Not quite. I don't know enough about that business to be sure but was recounting the only experience I knew about. I'm guessing the reason this person liked to default at the earliest opportunity was indeed due to more interest and fees. I also think other more responsible lenders will not drag time too long since a robust approach often yields quick results. Look at BC for example - they frequently start repossession proceedings quite quickly but rarely (if ever?) need to actually repossess.
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Monetus
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Post by Monetus on Jul 30, 2018 13:12:32 GMT
Funding Secure's pawn model is quite simply all sorts of wrong for these types of loans as borrowers aren’t forced into making interest payments after the initial six month loan period.
This creates a situation where the value of the asset is declining whilst accrued interest continues to increase at a rapid rate.
With a small fixed period of forbearance (say 90 days) this might be OK but FS regularly gives borrowers 3, 6, 12, even 24 months to sort their situations out without asking for a single penny which eventually results in a situation where capital loss is inevitable.
Because borrowers aren't in fear of Funding Secure come repayment time (they know FS are reluctant to default loans) and that they won't be forced to pay interest they adopt a relaxed approach to repayment (who can blame them) as they know they'll be able to drag things out as long as required.
Meanwhile, over a long enough timescale, the risk for investors increases significantly as the value of the asset continues to decline and the original loan LTV becomes greatly exceeded with the forever accruing interest.
Perhaps if FS required borrowers to service interest on a monthly basis following the expiry of their 6-month term then things would improve - investors would face less risk and the borrowers would be inclined to pay back more promptly.
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Post by beepbeepimajeep on Jul 30, 2018 13:43:12 GMT
The best course of action is to assess the situation and to work with the borrower to find a solution. This takes time. Banks do not go for repossession as soon as you miss a mortgage payment, they work to find a solution. Likewise with bridge loans, they try and avoid a forced sale of the asset - over 50% of bridge loans run over term, even with banks. What about the pawn loans such as the vases or various paintings? I'm all for a little bit of flexibility and allowing some time but when you are 8 months overdue and the borrower has repeatedly lied about paying the interest then things have gone too far. They should be sold fairly sharpish after the end date if nothing is actually forthcoming. That is after all the deal we signed up to. FS appear to be doing basically nothing to force repayment. What about the assets which are depreciating in value every day? The legendary powerboats can only be going down in value yet FS are continuing to update complete nonsense and feed us all a load of rubbish 17 months after the supposed end date. Absolute BS. Repayments would be the only thing that could help the platform now. Frankly some assets being sold and loans being completed would be good enough for me at the moment. It's already clear to me they can't deal with these situations and they are already in big trouble. What I really need now is proof they do have control over these assets that they claim to have control over for us. I'm not so sure they do for several of the loans.
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paulb
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Post by paulb on Jul 30, 2018 13:50:35 GMT
Perhaps if FS required borrowers to service interest on a monthly basis following the expiry of their 6-month term then things would improve. FS do offer a means of allowing borrowers to service their interest - renewing their loan. If borrowers were forced to pay their interest and renew within a few months of of the loan becoming due, that would significantly reduce the risks you talk about. This does lead to the question of what to do when the renewal doesn't get filled, but surely if we're at the point where the borrower is unable to pay, and the lenders are unwilling to risk their capital further, then that's the time to default?
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bg
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Post by bg on Jul 30, 2018 13:52:29 GMT
What about the pawn loans such as the vases or various paintings? I'm all for a little bit of flexibility and allowing some time but when you are 8 months overdue and the borrower has repeatedly lied about paying the interest then things have gone too far. They should be sold fairly sharpish after the end date if nothing is actually forthcoming. That is after all the deal we signed up to. FS appear to be doing basically nothing to force repayment. What about the assets which are depreciating in value every day? The legendary powerboats can only be going down in value yet FS are continuing to update complete nonsense and feed us all a load of rubbish 17 months after the supposed end date. Absolute BS. Agree...clearly there is some other issue with these loans. I'm hoping to get to the bottom of it. The powerboats - seems clear to me they can't find a buyer.....you can't sell without a buyer. Yes, completely agree. I am pretty sure they know this and are giving it their full attention (well I hope they are). The big increase in updates recently is welcome but we've got to the point where the only thing that I will settle for is actual repayments (by whatever means)
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Monetus
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Post by Monetus on Jul 30, 2018 14:03:55 GMT
Perhaps if FS required borrowers to service interest on a monthly basis following the expiry of their 6-month term then things would improve. FS do offer a means of allowing borrowers to service their interest - renewing their loan. If borrowers were forced to pay their interest and renew within a few months of of the loan becoming due, that would significantly reduce the risks you talk about. Agreed but the issue is that FS don't force borrowers into doing anything which leaves loans in a complete state of limbo. There are countless pages of loans that are anywhere between 30 days and 2 years overdue that haven't paid a penny of interest. FS need to either be tougher on borrowers with the current system or change their model so that investors aren't the ones assuming all of the increased risk of their reluctance to take action - which could be achieved by forcing monthly interest to be serviced from day 1 of the loan becoming overdue or the loan being put into default.
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greenslime
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Post by greenslime on Jul 30, 2018 16:55:39 GMT
What about the pawn loans such as the vases or various paintings? Well, it was recently pointed that in the case of some of the paintings FS may not actually have the items in their possession. Given FS's characterisation of the recovery of these loans as 'complex' I am resigned to a prolonged series of updates of dubious utility and marginal literacy, but little in the way of repayments. And before anybody says it, it's entirely my own fault for not looking before I leapt, aka doing some DD.
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adrian77
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Post by adrian77 on Jul 30, 2018 17:03:45 GMT
Exactly - as I see it the pawn model works very well which may explain why it has been around for hundreds of years. Somebody defaults on a Rolex and it is easy to realise the funds - somebody borrows against a fanciful residual value building project and hits problems then the value plummets and it is difficult to sell and the interest rockets and the lenders are to use a technical term taken from academic economic finance - stuffed!
This castle on the other platform looked very cheap to me at £1.5m - goodness knows what the bulding plot in Whitehaven will now go for...
As a dealer/developer I have my eye on a few of the interesting FS property loans as I can see them going for a song...
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mjc
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Post by mjc on Jul 30, 2018 17:56:36 GMT
to a point I would agree but I would say being late in a development is one thing if ,like me, you only deal in cash and have additional readies in the bank. If you are like some of these borrowers who seem to have no cash and facing compulsory strike off etc then if you are left repaying e.g. £40K pcm in interest charges being late is not ideal - in fact (and I have the t-shirt) a complete disaster! Maybe there is a reason why most developers can't borrow anywhere else apart from FS or similar. If I went to my bank manager and asked him to fund some of these speculative developments that FS have done he would ask my wife if I had stopped taking the tablets... Being late in repayment of development and bridge loans is par for the course. The best course of action is not to call the receivers in and immediately go for a forced sale. That will result in a bad outcome for everyone most of the time.
The best course of action is to assess the situation and to work with the borrower to find a solution. This takes time. Banks do not go for repossession as soon as you miss a mortgage payment, they work to find a solution. Likewise with bridge loans, they try and avoid a forced sale of the asset - over 50% of bridge loans run over term, even with banks. That said some of the FS updates are ludicrous....clearly they have some loans with serious problems - but they have the option of either crystallising a massive loss for investors now or trying to get a better outcome. I think most people would go for the latter. What they really need now are some actual repayments. They need to show investors they can deal with these situations or they are in big trouble. This is a Catch 22. Borrowers know it’s expensive and time consuming to repossess. Some will play the system relying on FS’s reputation for not chasing as they have little pecuniary interest to do so. If FS made it clear it is a contractual term to repay interest when due, or they WILL be chased, they would pay promptly - with no need to actually do so. If interest and renewal intentions are not made at 6 months the nascent debtor will be a league 1 candidate.
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debaura
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Post by debaura on Jul 30, 2018 18:26:48 GMT
Funding Secure's pawn model is quite simply all sorts of wrong for these types of loans as borrowers aren’t forced into making interest payments after the initial six month loan period. This creates a situation where the value of the asset is declining whilst accrued interest continues to increase at a rapid rate. With a small fixed period of forbearance (say 90 days) this might be OK but FS regularly gives borrowers 3, 6, 12, even 24 months to sort their situations out without asking for a single penny which eventually results in a situation where capital loss is inevitable. Because borrowers aren't in fear of Funding Secure come repayment time (they know FS are reluctant to default loans) and that they won't be forced to pay interest they adopt a relaxed approach to repayment (who can blame them) as they know they'll be able to drag things out as long as required. Meanwhile, over a long enough timescale, the risk for investors increases significantly as the value of the asset continues to decline and the original loan LTV becomes greatly exceeded with the forever accruing interest. Perhaps if FS required borrowers to service interest on a monthly basis following the expiry of their 6-month term then things would improve - investors would face less risk and the borrowers would be inclined to pay back more promptly. Absolutely spot on
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