arby
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Post by arby on Sept 24, 2018 22:30:43 GMT
Reading the loan offers, it always seems to make it clear that a supplemental loan has no bearing on the original loan and therefore it is of no concern to the original loan holder, right? Well reading FS' terms, I saw this:
6.2.5 Net proceeds of sale of Assets shall be used to settle amounts due in the following order:
1. Principal amount of Loan which was funded by, and is repayable to, the Investors (allocated pro rata in accordance with the proportion of the Loan amount which each Investor invested);
2. Direct costs incurred by FundingSecure through the setting up and the administration of the Loan including, but not limited to, storage costs, referral fees and valuation fees up to the date of sale;
3. Interest due to the Investors up to the date of sale (allocated pro rata in accordance with the proportion of the Loan amount which each Investor invested);
4. Administration fees due to FundingSecure not recovered through clause 6.2.5(ii) above;
5. The balance (if any) will be returned to the Borrower.
Am I reading it right, that a supplemental loan would be repaid before the interest on the primary loan? I guess it's openly stated in the terms so I shouldn't be too annoyed, but did all of you realise that every supplemental loan and extra facility put your return at risk on earlier facilities? (Your risk of capital repayment isn't changed, I'm just focusing on interest).
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Post by Ace on Sept 24, 2018 23:22:38 GMT
It certainly isn't clear to me, but the priority order could be:
1 to 4 for the primary loan.
Followed by 1 to 5 for the secondary loan.
Only way to be sure is to ask FS directly.
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sqh
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Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Sept 24, 2018 23:58:01 GMT
arbyA Supplemental loan is a separate loan. When a new loan is issued you lend on the terms set out at drawdown, you have no idea if a Supplemental loan may be launched at a later date. A Supplemental loan can't be allowed to alter those terms.
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arby
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Post by arby on Sept 25, 2018 6:32:19 GMT
arbyA Supplemental loan is a separate loan. When a new loan is issued you lend on the terms set out at drawdown, you have no idea if a Supplemental loan may be launched at a later date. A Supplemental loan can't be allowed to alter those terms. That's exactly what I thought it should be, but reading the terms above I wasn't sure.
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aj
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Post by aj on Sept 25, 2018 7:16:35 GMT
Yes they can, but not in that way.
To give the example of the loan in Lytham St Annes, the first charge is long overdue but there is no chance FS will consider defaulting as there are 4 supplemental loans after it and a default would likely result in a 100% loss for the later charges. These later loans have in effect removed the option of a swift default, instead we must rely on the borrowers exit plan.
Admittedly this is an unusual example, usually supplemental loans are used to increase the value of the security, the supplementals here were used to purchase other land which is not part of the security.
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mullet
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Post by mullet on Sept 25, 2018 9:09:44 GMT
It certainly isn't clear to me, but the priority order could be: 1 to 4 for the primary loan. Followed by 1 to 5 for the secondary loan. Only way to be sure is to ask FS directly. But 2 and 4 are surely common across both loans? So is it therefore 1 to 4 for primary, followed by 1,3,5 for the secondary?
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arby
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Post by arby on Sept 25, 2018 9:25:27 GMT
It certainly isn't clear to me, but the priority order could be: 1 to 4 for the primary loan. Followed by 1 to 5 for the secondary loan. Only way to be sure is to ask FS directly. But 2 and 4 are surely common across both loans? So is it therefore 1 to 4 for primary, followed by 1,3,5 for the secondary? But are 2 & 4 increased by issuing a new loan? I'd assume so. So is the whole of FS' expenses paid or do they track expenses separately for the supplemental loan?
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rogerthat
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Post by rogerthat on Sept 25, 2018 10:00:53 GMT
By coincidence I was discussing this very same topic myself yesterday..and reading this thread im still not entirely sure. Did I read something somewhere recently (from FS) that a borrower can repay/renew ? any loan they wish whether it is next inline or not ?
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arby
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Post by arby on Sept 25, 2018 11:16:41 GMT
By coincidence I was discussing this very same topic myself yesterday..and reading this thread im still not entirely sure. Did I read something somewhere recently (from FS) that a borrower can repay/renew ? any loan they wish whether it is next inline or not ? Yes. You did. It was on a loan update where exactly that happened. Surely each loan should be required to be repaid in order, but once 2 loans are overdue, then I believe that every loan against that asset should also be classed as overdue. From that point on, any repayment should go to the first charge holder first.
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rogerthat
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Post by rogerthat on Sept 25, 2018 11:35:03 GMT
By coincidence I was discussing this very same topic myself yesterday..and reading this thread im still not entirely sure. Did I read something somewhere recently (from FS) that a borrower can repay/renew ? any loan they wish whether it is next inline or not ? Yes. You did. It was on a loan update where exactly that happened. Surely each loan should be required to be repaid in order, but once 2 loans are overdue, then I believe that every loan against that asset should also be classed as overdue. From that point on, any repayment should go to the first charge holder first. Then if true, the seniority of loans as well as PG's (which we already knew) are meaningless. That should cheer up those in the Lytham saga..not
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blender
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Post by blender on Sept 25, 2018 12:34:39 GMT
Thank you for another thread which reduces the temptation to join FS. Of course, FS might just create a post to say how it all works. They could take a strictly theoretical case, such as Whitehaven, and illustrate how the proceeds of security might be allocated.
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paulb
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Post by paulb on Sept 27, 2018 20:16:37 GMT
But 2 and 4 are surely common across both loans? So is it therefore 1 to 4 for primary, followed by 1,3,5 for the secondary? But are 2 & 4 increased by issuing a new loan? I'd assume so. So is the whole of FS' expenses paid or do they track expenses separately for the supplemental loan? I would have thought any increase in costs/administration would be minor - the item would already be in storage, valuation/auction/selling fees won't vary much on the size of the values of the loans, only on the value of the security. There may be additional legal work setting up the supplemental loan(s), but that should (hopefully/as I see it) be tracked per loan, so the supplemental loan(s) shouldn't affect the senior loan(s). At the very least, I don't think there's any doubt that the principal of the most senior loan is by far the safest.
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