ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on May 1, 2019 21:16:24 GMT
1) I don't understand what criteria FS use to class a loan as defaulted.As an example I'd use the Strand Road, Londonderry loan which is still classed as being "active" even though receivers were appointed in the middle of last month and has been "active" for well over 1000 days. Personally I would have thought that you only appoint receivers when a loan is "defaulted" but I could be totally wrong. 2) I'd appreciate any explanation as to the criteria FS use and also why FS would appoint receivers for an "active" loan 1) I don't either. And nor am I entirely certain FS have a firm grip on the subject. 2) I received an email from FS where they stated: " Technically it is not in default as it does not meet the irrecoverable definition under SAIM 12,000, which FundingSecure uses as a guide to formally defaulting." So you/me/we can attempt to adopt a set of guidelines produced for tax purposes and see if we can overlay those in a consistent fashion for the purposes of deciding whether a loan is in a state of 'default' or not. Fortunately, that's a very quick process as SAIM12050 suggests: " Whether a loan has become irrecoverable should be judged on a case by case basis, however as the loan will be managed by a platform, the platform would usually be in a position to determine when a loan has become irrecoverable. The platform would then inform the lender that the loan had become irrecoverable." So if the platform (FS) state "this loan is NOT irrecoverable", they can also state "this loan is NOT in default". A question a lender might have to FS might be: "By adopting SAIM12000, if you are stating on the platform that loan XYZ is not in default, is FS de facto stating that loan XYZ cannot be treated as irrecoverable for tax purposes and would respond as such to HMRC, if queried." (Typically, I'm not interested in claiming tax relief until absolute losses had been crystallised, as categorically stated by the platform; but I'm aware that, for some, it has merits / benefits, so the adoption of SAIM12000 for purposes of defining a defaulted loan has a certain nuance to it.) And for laughs, were I an errant borrower, a question I might have for FS is: "Do you consider this loan to be in any way recoverable? If you do, then why are you accusing me of being in default?"  FS email was nonsense. Whether a loan is in default has nothing to do with the definition given in SAIM12000 which is a specific definition relating to loss relief. A loan is in default if it outside the terms of the loan agreement. However, all default means is that lender/platform has the right to enforce the security but are not required to. Legally enforcing the security & formally defaulting the loan would then make that loan eligible to be considered under SAIM12050 as 'treatable' as irrecoverable, using which criteria FS previous declared loans as irrecoverable until recently.
If FS are already pursuing recovery of the loan through legal means ... receiver, administration, bankruptcy, possession ... then the the loan is in default and been defaulted because they cant take such action otherwise.
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iRobot
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Post by iRobot on May 1, 2019 21:33:24 GMT
There is no real benefit to prematurely defaulting a loan. Getting the balance of defaulting a loan and risking detrimental damage to the security is tricky. I do think however overall recovery beneficial to investors may be achieved by defaulting before accruing interest makes no payment a viable best option for a borrower. Might we be at cross purposes over the term 'defaulting'? For my money, a platform marks a loan as 'defaulted' when it fails to abide by the conditions of of the loan agreement. It is (IMO) a purely mechanical function. The purpose of the 'Defaulted' label isn't a reflection of any specific loan's likelihood of recovery, but rather an aggregation marker for purposes of judging the loan book as a whole. I don't see a situation where a platform acknowledging a loan has technically breached its' loan contract by applying the label 'Defaulted', might adversely affect that loans recovery prospects. The benefit of a more rigid application of 'Defaulted' labelling comes from the more realistic appraisal of a platform's overall loan book performance. By keeping the platform 'honest' with more transparent loan book performance, it may encourage said platform to better select loans, to better manage loans and to ... well, ... just generally be better. (So, for clarity, in my relaxed-view world, 'Defaulted' do not necessarily mean calling in the heavy mob. 'Defaulted' does mean 'failed to meet loan contract commitments'.)
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iRobot
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Post by iRobot on May 1, 2019 21:35:45 GMT
FS email was nonsense. Whether a loan is in default has nothing to do with the definition given in SAIM12000 which is a specific definition relating to loss relief. A loan is in default if it outside the terms of the loan agreement. However, all default means is that lender/platform has the right to enforce the security but are not required to. Legally enforcing the security & formally defaulting the loan would then make that loan eligible to be considered under SAIM12050 as 'treatable' as irrecoverable, using which criteria FS previous declared loans as irrecoverable until recently.
If FS are already pursuing recovery of the loan through legal means ... receiver, administration, bankruptcy, possession ... then the the loan is in default and been defaulted because they cant take such action otherwise.
Agreed. 100%. (And wish I'd read this prior to replying to godanubis.)
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iRobot
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Post by iRobot on May 2, 2019 13:54:37 GMT
I currently have a test account with initial deposit of £6000 which I have been playing with by having no more than £50+ interest bought in any one loan. Loans were purchased with effective rates of over 20% . This has been going just over a year and currently profit paid is running at 16% ROI the late payers reduced the returns as you mentioned as does the lack of interest on bought interest. There have been no actual losses however current defaults amount to a further 2% were they to be 100% loss . So overall returns are higher than you would get after losses if you had bought and held the same loans without buying interest. Would you be able to give £-values on returns for that £6,000 account and then divide by the amount of effort (in terms of person hours) to manage, were it being done on the basis that this was the only FS account being managed? Also, how scale-able is this? For example, does the nature of the FS SM allow for this account to be increased to, say, £12,000 and still maintain the '£50+ interest / effective rates >20%' per loan?
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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 May 2, 2019 21:53:03 GMT
Only time you need a bit of effort is initial investment. As returns are spread out you only have to reinvest £25-50 when each pays back.
Easy with £6000 not viable with 10’s of thousands. That takes different approach
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Post by dan1 on May 30, 2019 14:16:45 GMT
For those not on MT please be aware that the race car borrower has been placed into default by MT. There's usually a pretty good reason why loans typically trading at 1% premium suddenly get offered at 1% discount. Seemed the most appropriately named thread to post this in  |
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arby
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Post by arby on May 30, 2019 14:48:08 GMT
For those not on MT please be aware that the race car borrower has been placed into default by MT. There's usually a pretty good reason why loans typically trading at 1% premium suddenly get offered at 1% discount. Seemed the most appropriately named thread to post this in Are you suggesting (or do you know?) it is the same borrower for all car loans now at -1%?
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rogerthat
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Post by rogerthat on May 30, 2019 16:08:59 GMT
Looks like it..!
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arby
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Post by arby on May 30, 2019 16:14:36 GMT
Yep, update seems to make that clear. As usual, would have been good to know....
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adrian77
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Post by adrian77 on May 30, 2019 18:36:33 GMT
Not that this will cause any problems for certain flippers ! Will be very interesting to see what these cars bring at auction or wherever
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