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Post by df on Jan 21, 2019 17:44:39 GMT
very good question - I asked FS the same question - basically it ensures the loan offering will fill...any comments? Yes, means somebody has promised to fill the funding gap. Not sure about the exact meaning of the word itself - waiting for resolution of "defender" loan to find out.
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arby
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Post by arby on Jan 21, 2019 18:15:49 GMT
very good question - I asked FS the same question - basically it ensures the loan offering will fill...any comments? Yes, means somebody has promised to fill the funding gap. Not sure about the exact meaning of the word itself - waiting for resolution of "defender" loan to find out. Isn't the primary purpose in this loan that the borrower needs the funds quickly? Do I believed the point is that the borrower already has the funds (provided by FS/underwriter) to enable the purchase.
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cwah
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Post by cwah on Jan 21, 2019 18:28:15 GMT
does that mean if the loan default, this underwriter guy also pay the difference in the missing funds? And this underwritter, isn't it just FS who paid?
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arby
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Post by arby on Jan 21, 2019 18:39:53 GMT
does that mean if the loan default, this underwriter guy also pay the difference in the missing funds? And this underwritter, isn't it just FS who paid? No, whoever invests in the loan replaces the underwriters investment. Once (if?) the loan fills then the underwriters liability will be over.
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cwah
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Post by cwah on Jan 21, 2019 18:51:55 GMT
does that mean if the loan default, this underwriter guy also pay the difference in the missing funds? And this underwritter, isn't it just FS who paid? No, whoever invests in the loan replaces the underwriters investment. Once (if?) the loan fills then the underwriters liability will be over. ah I see. I wouldn't invest in it then. I was hoping some guardian angel would be a guarantor of the loan 
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arby
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Post by arby on Jan 21, 2019 19:03:02 GMT
No, whoever invests in the loan replaces the underwriters investment. Once (if?) the loan fills then the underwriters liability will be over. ah I see. I wouldn't invest in it then. I was hoping some guardian angel would be a guarantor of the loan It does indicate that somebody somewhere has a lot of confidence, either in the loan itself or in FS investors buying them out of their liability. Based on recent funding slowdown, I'd suggest there should be at least some confidence in the loan.
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adrian77
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Post by adrian77 on Jan 21, 2019 19:36:38 GMT
possibly or perhaps an big investor thinks it is worth a punt to pour money in and then flip on the SM market at a discount -its a quick return for those with the bottle and readies...
As I see it you can make (or lose) money in FS via 2 routes - trading using loan bonus etc
or investing in the actual loan as a business venture. If I had the money I may take a punt on a large investment in this flat and flipping in the SM. For a business venture - no way due to the stamp duty, letting costs, time lag for tenants etc and worst of all the high number of similar flats to let in the same building.
However an interesting one to follow...
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Post by df on Jan 21, 2019 20:22:54 GMT
possibly or perhaps an big investor thinks it is worth a punt to pour money in and then flip on the SM market at a discount -its a quick return for those with the bottle and readies... As I see it you can make (or lose) money in FS via 2 routes - trading using loan bonus etc or investing in the actual loan as a business venture. If I had the money I may take a punt on a large investment in this flat and flipping in the SM. For a business venture - no way due to the stamp duty, letting costs, time lag for tenants etc and worst of all the high number of similar flats to let in the same building. However an interesting one to follow... Can't imagine somebody successfully offloading a 6 figure sum @-1%, but who knows? Bonuses seem to work, some larger investments started coming in. Loan updates suggest that the loan will draw down by the end of this week. If it will, good luck to those who have taken the risk.
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r00lish67
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Post by r00lish67 on Jan 21, 2019 20:32:47 GMT
possibly or perhaps an big investor thinks it is worth a punt to pour money in and then flip on the SM market at a discount -its a quick return for those with the bottle and readies... As I see it you can make (or lose) money in FS via 2 routes - trading using loan bonus etc or investing in the actual loan as a business venture. If I had the money I may take a punt on a large investment in this flat and flipping in the SM. For a business venture - no way due to the stamp duty, letting costs, time lag for tenants etc and worst of all the high number of similar flats to let in the same building. However an interesting one to follow... Can't imagine somebody successfully offloading a 6 figure sum @-1%, but who knows? Bonuses seem to work, some larger investments started coming in. Loan updates suggest that the loan will draw down by the end of this week. If it will, good luck to those who have taken the risk. Bonuses are in any case forfeited for any amount you sell on the SM (although you can for example buy £10k, sell £5k and still earn a bonus on the remaining £5k). A sensible system as otherwise, yes, the SM would be swamped at -1% for any bonus loan.
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baldpate
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Post by baldpate on Jan 21, 2019 21:31:56 GMT
I wonder, however, whether this same constraint (i.e. sell before term - lose your bonus) applies to underwriters? Don't underwriters make up-front fee,s rather than back-end bonuses?
I asked FS whether underwriters were permitted to sell their loan parts on the SM, just like retail investors (and in competition with them, by discounting), and was told - yes, they may. Perhaps I asked the wrong question, but my understanding was that underwriters could simply try to offload their holding on the SM, without any loss-of-bonus type penalty.
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cwah
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Post by cwah on Jan 22, 2019 0:20:49 GMT
My guess instead is that this underwritter has lent the money for a special rate such as 15-20%.
And as investors buy more in from the primary market, he would receive gradually less and less interest.
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adrian77
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Post by adrian77 on Jan 22, 2019 10:15:19 GMT
Well we have heard that one before --- not saying this won't happen but based on my experience of BLT loans this won't be easy considering the vast sum of money and ,at best, borderline liquidity.
I am still a bit confused as to what exactly is the situation with the "underwriter"
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bg
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Post by bg on Jan 22, 2019 10:37:42 GMT
Underwriting happens on many platforms. One of the main reasons borrowers pay such high rates for bridging loans is for speed of getting the money. Getting a BTL mortgage through a bank typically takes several weeks - and some may require a new build flat to have been let before lending on it. If you have been given notice to complete on an off plan purchase of 10 days then that just doesn't work. Paying c15% ARR for cash for a few months while a conventional mortgage is sorted out is nothing unusual and cheaper than failing to complete and losing your deposit.
For a P2P platform to offer bridge loans they need to be able to come up with the cash quickly. It's no good promising the money then having to tell the client they will have to wait several weeks for the loan to fill. That defeats the whole object of the exercise.
As the P2P platform is not able to commit their own funds (any more) they have to resort to underwriters. This works by paying the underwriter a fixed fee to stump up the money now (which will be used to make the loan straight away for the client). The loan will remain as an available loan and as people buy it the underwriter will be gradually taken out of the loan until their holding falls to zero. They will accrre the interest daily on the balance they hold at midnight each night. The loan parts held by the underwriter will not be on the SM but continue to sit under available investments.
So in this example, say the underwriter agreed a 1% underwriting fee. They would receive £4,750 up front and also interest on the loan they hold. Lets say it takes 2 months to sell down in a linear fashion then they will receive 11% (possibly more) on what they hold which will be £4,350 in interest. So after 2 months they will have received £9,100 and have no risk because they have sold out the loan.
That's how it works in theory. Obviously the risk for the underwriter is that the loan doesn't sell to retail investors and if it defaults they could be left holding a big chunk resulting in a sizable loss.
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adrian77
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Post by adrian77 on Jan 22, 2019 10:57:25 GMT
thanks for the above reply which is very clear - can I ask if the underwriter still gets the bonuses with this loan or is it only the retail investors?
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bg
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Post by bg on Jan 22, 2019 12:30:20 GMT
thanks for the above reply which is very clear - can I ask if the underwriter still gets the bonuses with this loan or is it only the retail investors? The deal will be between the underwriter and FS. Given the idea is to completely sell down the loan to retail then I can't imagine bonuses are too relevant and it will all be taken care of in the fee - but that is just me guessing. On another note, having loans underwritten can be viewed as a benefit. If there is a panel of experienced underwriters then that helps with scrutiny of the loan. I imagine FS would be asked many of the basic questions that have been raised in this thread (ie why does the borrower need the loan) by the underwriter which can flush out many of the problems and improve on presentation on the platform. (I would not be risking £475k on this loan without asking quite a few questions and receiving a satisfactory answer) I haven't underwritten on FS before but have seen loans pulled on other platforms (before hitting the platform) because of issues raised by underwriters. The underwriters can also give valuable feedback on additional information to be included in the loan description which will make the loan easier to understand (as it is in their interest that the loan sells as quickly as possible).
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