Mousey
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Post by Mousey on Feb 19, 2019 14:02:34 GMT
According to land registry records the price paid for both titles in May 2018 was marginally under the VR figure (and hence £250k+ lower than stated by FS in the listing, which may therefore include some costs.)
Yeah the art loans had an upfront arrangement fee of 2% - as paid for by borrowers.
The purported first charge is clearly a de facto second charge loan to us investors with the 'first charge' being more than the value hence a recovery of nil under default conditions. One to avoid!
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rs
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Post by rs on Feb 19, 2019 17:31:08 GMT
According to land registry records the price paid for both titles in May 2018 was marginally under the VR figure (and hence £250k+ lower than stated by FS in the listing, which may therefore include some costs.)
Yeah the art loans had an upfront arrangement fee of 2% - as paid for by borrowers.
The purported first charge is clearly a de facto second charge loan to us investors with the 'first charge' being more than the value hence a recovery of nil under default conditions. One to avoid!
How much interest rate will the institutional backer be receiving? I reckon about 10%. It would be nice if FS can clarify this point but I doubt they will.
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Post by mrclondon on Mar 29, 2019 14:38:50 GMT
fundingsecure - it would be helpful if you could clarify the repayment ranking for accrued interest. i.e. does the institution's accruing interest (& fees etc) rank ahead of, or behind the FS capital (of £1.7m-£2m)
Almost six weeks later, my query has now been addressed via an 'Added Clarification' section on the loan description.
Whilst this should have been assumed to be the case in the absense of any additional commentary, I felt that in making this loan available to retail investors it should have been spelt out explicitly. The huge size of the first charge means interest accrual will quickly dwarf the second charge capital. On the update tab there is a note that lenders who wish to withdraw from the loan should contact customer services on or before 2nd April. (Also note that a £250 min was applied to this loan last week)
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Post by dan1 on Mar 29, 2019 15:17:45 GMT
fundingsecure - it would be helpful if you could clarify the repayment ranking for accrued interest. i.e. does the institution's accruing interest (& fees etc) rank ahead of, or behind the FS capital (of £1.7m-£2m)
Almost six weeks later, my query has now been addressed via an 'Added Clarification' section on the loan description.
Whilst this should have been assumed to be the case in the absense of any additional commentary, I felt that in making this loan available to retail investors it should have been spelt out explicitly. The huge size of the first charge means interest accrual will quickly dwarf the second charge capital. On the update tab there is a note that lenders who wish to withdraw from the loan should contact customer services on or before 2nd April. (Also note that a £250 min was applied to this loan last week)
I'm not in this loan but would expect the information highlighted above to be emailed to lenders rather than relying on individuals checking the update tab in the five days or so prior to the deadline.
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rs
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Post by rs on Mar 29, 2019 15:28:21 GMT
I wonder how much interest rate the institutional lender is receiving compared to FS lenders. Surely it'll be only 13% but shame FS don't disclose this.
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adrian77
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Post by adrian77 on Mar 29, 2019 15:53:19 GMT
outrageous !
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Post by Deleted on Mar 29, 2019 15:58:32 GMT
Legal Charge: 1st* (ranking behind the institutional backer) is this nonsense? a 1st charge ranking behind another group on the same security with higher priority is not really a 1st charge is it? unless they have come up with a new '0th charge' concept... Or maybe they've discovered a loophole where you can describe something as 1st charge that behaves in practice like a 2nd charge. I'm so sick and tired of deceptive P2P practices, the FCA should be all over this like a rash
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r00lish67
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Post by r00lish67 on Mar 29, 2019 16:28:14 GMT
Legal Charge: 1st* (ranking behind the institutional backer) is this nonsense? a 1st charge ranking behind another group on the same security with higher priority is not really a 1st charge is it? unless they have come up with a new '0th charge' concept... Or maybe they've discovered a loophole where you can describe something as 1st charge that behaves in practice like a 2nd charge. I'm so sick and tired of deceptive P2P practices, the FCA should be all over this like a rash It's not exactly deceptive in my view. It is technically correct. There is a distinction to be made between being in a lower ranked part of a 1st charge and in a 2nd charge. I'm skirting at the edge of my own knowledge here, but AIUI FS would be in a stronger position to decide the timing and recovery method in a default situation alongside the other 1st charge-holder in the former situation. Ultimately though it is a fine distinction, and as FS have now pointed out explicitly, the amount of accrued interest that could build around the higher-ranked 1st charge position could in theory leave FS lenders to a total loss. At least people have the chance to cancel their investments now, should they wish to. Certainly not a loan I would consider being in I have to say.
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rocky1
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Post by rocky1 on Mar 29, 2019 17:12:48 GMT
FS should email all lenders in this loan be it £25,£250,whatever and make sure the little investors who they used to rely on are aware of this update which only came about from the insistance of our mrclondon.FS cannot be trusted in their loan decriptions,valuations,updates or anything else that comes out of them.originating any old sh*te loans to meet targets.look where we are with LY,seems FS think thats the way forward.
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Mousey
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Post by Mousey on Mar 29, 2019 17:17:52 GMT
The FCA regulate advertising for most financial services which includes products such as loans (e.g. peer to peer). The FCA has a website about Misleading financial promotions which includes questions a consumer might use to determine whether a financial promotion is misleading. These questions (and relevance to this loan) include: - What are the risks to my money and is this clear
It is not clear that under a recovery situation the return to FS lenders would be Nil.
- Is there important information that only appears in the small print? The Deed of Subordination which would not be understood by a retail investor.
- Is the promotion balanced (i.e. are both the benefits and negatives explained)? The recovery of Nil in the event of a default.
- ...Does it make it clear how this security/guarantee/protection is provided? The Deed of Subordination does not explain that in a recovery situation the recovery would be Nil. The effect of the Deed of Subordination would not be understood by a retail investor.
I would strongly encourage forum members to contact the FCA when they feel there is an issue and in their email specifically referr to criteria listed on their website. My complaint regarding this loan was passed onto their supervision team immediately and whilst I'm not happy the loan is still described as a first charge loan the addition of the clarification and opportunity to withdraw is welcome .
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trevor
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Post by trevor on Mar 29, 2019 17:36:37 GMT
Thanks for the update Mrclondon. I'm now out.
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Post by Deleted on Mar 29, 2019 18:28:54 GMT
It's not exactly deceptive in my view. It is technically correct. There is a distinction to be made between being in a lower ranked part of a 1st charge and in a 2nd charge. 'Technically correct' from a legal/semantic point of view perhaps, but if you were to quantitatively model/price or risk manage this structure, you would definitely treat the retail investors portion as a second tranche behind the institutional portion. Its also far from clear whose interests get priority on default... for example, what if an offer is received on the security that covers the institutional (1st priority) portion but not the retail (2nd priority) portion? Do the institutional investors get to force acceptance by virtue of controlling vote? This isn't just a theoretical question, this 'tranche warfare' is a well known practical consequence of multi-tier/tranche loan structures.
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Post by Deleted on Mar 29, 2019 18:47:24 GMT
Then again, I have avoided every single second-charge or tranche-B style structure I've come across in P2P, and have not regretted this strategy one bit so far.
The risk-reward of these type of structures is far more complex than the platforms like to admit.
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rocky1
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Post by rocky1 on Mar 29, 2019 18:53:12 GMT
what chance that the institutional lender,underwriter getting shafted on this one.very little i guess.
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lobster
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Post by lobster on Apr 4, 2019 20:48:19 GMT
Although this loan is now 85% filled , there is still over £1.3 m of funding required, because it's a monster £8.7m loan.
Doubtless we shall see in the fullness of time, but right now lenders aren't exactly falling over themselves to participate, that's for sure, even at 14% .
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is this nonsense? a 1st charge ranking behind another group on the same security with higher priority is not really a 1st charge is it? unless they have come up with a new '0th charge' concept...
