mikeb
Posts: 1,072 
Likes: 472
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Post by mikeb on Sept 9, 2014 8:31:04 GMT
Angle***, Hack*** and Liver**** Bridging loans accrued interests have all dropped by differing percentages, overnight, for no apparent reason. Check your change!
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Post by chris on Sept 9, 2014 8:45:37 GMT
Angle***, Hack*** and Liver**** Bridging loans accrued interests have all dropped by differing percentages, overnight, for no apparent reason. Check your change! There was a change to the accrued interest calculations overnight to correct Ipswich (where the loan part creation date differed from the drawdown date). I'll look into it.
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Post by chris on Sept 9, 2014 8:50:49 GMT
Okay the reason they have all lost accrued interest is because technically they've run past the end of the loan. That they were still accruing interest was in error before. I'll have to discuss with the ops team how they want to handle this as technically all those loans should be refinanced in the same way as Ipswich to correctly reflect the state of the loans, change in interest rates, etc.
Hopefully we're only a couple of weeks away from our more flexible loan model that fully supports all these refinancings, default interest, etc. instead of each involving a large amount of manual work.
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ramblin rose
Member of DD Central
“Some people grumble that roses have thorns; I am grateful that thorns have roses.” — Alphonse Karr
Posts: 1,370
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Post by ramblin rose on Sept 9, 2014 8:53:21 GMT
Thanks chris. We're all looking forward to that. |
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mikeb
Posts: 1,072
Likes: 472
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Post by mikeb on Sept 9, 2014 9:13:26 GMT
Thanks chris. We're all looking forward to that. "Amen sister!", and all that  With Angle****, it already has been refinanced, so would this be a 2nd refinance? chris "That they were still accruing interest was in error before" -- so really the slash in accrued is to knock it back to the default point, and the interest still accruing at the OLD rate is an illusion? [See EDIT] So the new auctions/loans will suddenly start with a chunk of accrued interest at the new default rate? There needs to be a clearer explanation on how you handle this situation, so people know what to expect. Also, shocking that no automated system picked up that loans are accruing past a stop date, at the wrong rate  EDIT: I've just rechecked my figures, running from start of auction to default date, and I agree that's the reason for the slashback. Running forward from default date to now at the new rate, I now also know how much to expect when the new auctions take over
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Post by chris on Sept 9, 2014 10:03:34 GMT
Fair bit of supposition here and in other threads so I'll try and explain as clearly as I can although this is a very technical topic.
The basic loan model of the site is flexible in terms of its inputs but is very rigid once a loan is drawn down, effectively locking the calculations in stone. I know FC works in the same way and suspect so do most of the other implementations out there although our loan model is much more flexible in terms of interest free periods, payment free periods, and support for non amortising loans and balloon payments. But the system can only operate on the information put into it and once the loan is drawn down we need to jump through several hoops to make changes, involving manual intervention which is always prone to mistakes.
When a loan defaults at the point of the final payment being due the current model doesn't support default interest rates as that is a change to the original loan parameters. Default interest was introduced after the design of the loan model and so isn't directly supported, instead interest continues to accrue at the current rate. The correct way to deal with this, at least currently, is to refinance the loan on the day of default. However there is a complication with this in that the refinancing only works if there is no outstanding interest, only the principal amount can be rolled over.
With Ipswich this was fine. The interest was already held on account so the loan could be refinanced. For whatever reason this didn't occur on the day of default but on Monday and so it had to be retroactively applied. This in turn highlighted that the current model of continuing to accrue interest was incorrect for this loan, in order to correct the amount of interest paid to lenders we needed to lock the accrued interest to the term of the loan.
However that change has had a knock on effect on the way those other three bridging loans were reflected in the system. Taking Angle*** as an example when it was refinanced it was given a 1 month extension that has since expired. Technically it should have been refinanced as a multiple month loan to give time for settlement to be arranged but that wasn't the decision taken at the time. The change to accrued interest locking it to the end of the loan term has therefore stopped this loan from correctly reflecting the current state of the loan.
The ops team is now discussing the best way of reflecting these loans in the system. The new solution is imminent so we may just revert them to continue accruing interest as before. As they are in default loan part sales are currently blocked so there's no knock on effects on deferred interest.
For what it's worth the new solution is much more flexible. Instead of locking in the loan at the point of drawdown the loan is recalculated dynamically. We have a solution allowing us to retroactively look at who held which portions of any given loan between any two points in time. This allows us to very easily pay out interest and principal amounts as well as cashback promotions or other payments with the system able to correctly distribute those payments back to the right lenders. The loan model is also applied dynamically with a concept of phases of a loan, allowing the admin team to set up any repayment plan they can think of, refinance as they see fit, and add new phases as needed. This allows them (or the system) to create a new default interest phase after a loan defaults. Interest and principal payments are also stored against the loan as they become due allowing them to be settled asynchronously in the event of default, recovery or other problem with the loan. If the principal amount is recovered before the interest (as with FF) then the new model can correctly reflect this, whereas they are tied in the current model.
The end result of the new model is that all day to day operations that I've currently seen manually forced into an inflexible model, always an error prone process, will be catered for with automated processes.
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