blender
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Post by blender on Jun 10, 2019 18:22:54 GMT
When FC default a loan they use the phrase. "We are defaulting this loan in order to protect your position by crystallising the liability of the guarantor." Does anyone know what it actually means? FC can default after 17 days without contact from a non paying borrower but generally don't. Is my position as lender 'safer' after default? Is this just positive spin with no substance? Flimsy Circumvolution. Fancy Circumcision?
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Post by Ace on Jun 10, 2019 21:57:17 GMT
Err... No thanks blender, but thanks for the offer!!! Wouldn't want folk to think I had no skin in the game 😄
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thedog
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Post by thedog on Jun 10, 2019 22:40:12 GMT
It's late so I may get the techie detail wrong... It's mostly spin under the circumstances of P2P, but I think what they're driving at is that when a loan is in breach of any of its T&Cs it could (in theory) come back in to compliance and if that happened it's legally difficult to enforce on that breach. Similarly even if it doesn't come back in to compliance it can be difficult to enforce based on a breach which has been ongoing for some time. The court may take the view that, depending on the exact circumstances, by doing nothing for a long period you've effectively waived your rights to enforce.
It is possible to send a "Reservation of Rights Letter" which basically says "you're in breach, we aren't enforcing yet but we reserve the right to do so" but it's not perfect (lawyers will usually advise they are renewed at least every 6 months for instance) so a "safer" approach is to "default the loan" - this should include issuing a notice of default to the borrower making the loan repayable on demand. You've not actually made the borrower insolvent but you're making your loan enforcable on demand should you wish to try (though if you try they go bust of course). A large PLC probably files for Admnistration at this point to protect the Directors. Smaller owner-managed companies may well try to keep going.
Any insolvency lawyer reading please feel free to correct me but this is the gist.
More importantly, are you suggesting circumcision by blender?? not drinking that milk shake.....
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blender
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Post by blender on Jun 11, 2019 11:11:53 GMT
Thanks for the useful and sensible explanation cthedog . Ref the FC, I should have left out the question mark. It was not an offer, just an alternative for the abbreviation and based on the use of pinking shears. I apologise for the lack of sensitivity, considering that much worse is done to dogs and other animals.
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Post by shanghaiscouse on Jun 11, 2019 11:28:33 GMT
When FC default a loan they use the phrase. "We are defaulting this loan in order to protect your position by crystallising the liability of the guarantor." Does anyone know what it actually means? FC can default after 17 days without contact from a non paying borrower but generally don't. Is my position as lender 'safer' after default? Is this just positive spin with no substance? It means they have reverted to the guarantor and told them they are now liable. In other words, they have given up on the original borrower.
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criston
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Post by criston on Jun 11, 2019 11:37:45 GMT
I was surprised to find some borrowers on FC without any guarantors at all.
I am trying to move to secured loans (under 70% LTV, but much lower if available) with guarantors as a secondary back up.
It's surprising, if true, that FC manage to get 40% recoveries.
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Post by shanghaiscouse on Jun 11, 2019 12:15:43 GMT
I went back through my 5 years of tax statements. What they show is the following:
1. In 5 years, not a single troubled loan has been sold on secondary market 2. Recoveries look poor. I had £12k of bad debts over the period, but only £205 of recoveries over the same 5-year period, although to be fair most of my investment was made in the final year. You could say that of my initial £32k investment, I had about £2.5k go bad, and £200 of that £2.5k recovered 3. The bad debt rate looks to have got massively worse in the last few months. During tax year 17-18 I had 50k invested for the whole 12 months and it saw 4.1% bad debt. Then in 18-19 I increased the investment substantially but the bad debt initially stayed at 3.8%, but since April 2019 it has shot up to 8.2%. I calculate this by downloading the portfolio, sorting the loan parts marked as bad debt, and dividing by the amount on loan. As some of those loans already went bad in prior periods then this is not completely correct as they should be excluded and therefore the % bad debt would be HIGHER. In just two months since April 5 I had 5.3k bad debts on a 370k portfolio. At this rate the bad debt would be 30k of bad debts for a year.
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criston
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Post by criston on Jun 11, 2019 12:33:09 GMT
shanghaiscouse; That doesn't look good.
The other thing you should check (if you are not undergoing a sell period) is click on the sell button. This will tell you how much of your portfolio you are able to sell, which can be up to 10% less than your portfolio total. OK, not all the difference are bad debts, but It can be worrying. This is why I am getting out.
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Post by Deleted on Jun 11, 2019 14:00:22 GMT
It's late so I may get the techie detail wrong... It's mostly spin under the circumstances of P2P, but I think what they're driving at is that when a loan is in breach of any of its T&Cs it could (in theory) come back in to compliance and if that happened it's legally difficult to enforce on that breach. Similarly even if it doesn't come back in to compliance it can be difficult to enforce based on a breach which has been ongoing for some time. The court may take the view that, depending on the exact circumstances, by doing nothing for a long period you've effectively waived your rights to enforce.
It is possible to send a "Reservation of Rights Letter" which basically says "you're in breach, we aren't enforcing yet but we reserve the right to do so" but it's not perfect (lawyers will usually advise they are renewed at least every 6 months for instance) so a "safer" approach is to "default the loan" - this should include issuing a notice of default to the borrower making the loan repayable on demand. You've not actually made the borrower insolvent but you're making your loan enforcable on demand should you wish to try (though if you try they go bust of course). A large PLC probably files for Admnistration at this point to protect the Directors. Smaller owner-managed companies may well try to keep going.
Any insolvency lawyer reading please feel free to correct me but this is the gist.
More importantly, are you suggesting circumcision by blender?? not drinking that milk shake.....
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Post by Deleted on Jun 11, 2019 14:09:07 GMT
It's late so I may get the techie detail wrong... It's mostly spin under the circumstances of P2P, but I think what they're driving at is that when a loan is in breach of any of its T&Cs it could (in theory) come back in to compliance and if that happened it's legally difficult to enforce on that breach. Similarly even if it doesn't come back in to compliance it can be difficult to enforce based on a breach which has been ongoing for some time. The court may take the view that, depending on the exact circumstances, by doing nothing for a long period you've effectively waived your rights to enforce.
It is possible to send a "Reservation of Rights Letter" which basically says "you're in breach, we aren't enforcing yet but we reserve the right to do so" but it's not perfect (lawyers will usually advise they are renewed at least every 6 months for instance) so a "safer" approach is to "default the loan" - this should include issuing a notice of default to the borrower making the loan repayable on demand. You've not actually made the borrower insolvent but you're making your loan enforcable on demand should you wish to try (though if you try they go bust of course). A large PLC probably files for Admnistration at this point to protect the Directors. Smaller owner-managed companies may well try to keep going.
Any insolvency lawyer reading please feel free to correct me but this is the gist.
More importantly, are you suggesting circumcision by blender?? not drinking that milk shake.....
Thanks for your post. I think from what you say if their T&Cs allow them to default after 17 days of no contact, it would serve the investors interests better if they did just that instead of waiting 3 months whilst the business goes bust and the guarantor moves house. It might not make a difference to the outcome, but it might....
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keitha
Member of DD Central
2024, hopefully the year I get out of P2P
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Post by keitha on Jun 25, 2019 20:58:47 GMT
I've got a recovery that will take 126 years... ive got one paying £18.57 at 1P a month so 154 years
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benaj
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Post by benaj on Feb 28, 2020 23:37:48 GMT
www.fundingcircle.com/uk/statistics/Latest lifetime default rates on FC: Year of Orgination | Default (%) | 2012 | 5.4 | 2013 | 6.6 | 2014 | 6.5 | 2015 | 5.9 | 2016 | 8 | 2017 | 7 | 2018 | 2.4 |
Lifetime default rates after 12 months: Year of Orgination | Default (%) | 2012 | 1.8 | 2013 | 1.6 | 2014 | 1.2 | 2015 | 1.6 | 2016 | 2.1 | 2017 | 2.3 | 2018 | 2.4 |
It's pretty clear default rates have gone up since 2016. FC manages to keep pre 2016 loan defaults under 6.6% and the lifetime default rate graph shows 2017 and 2018 cohorts is very likely to have even higher default rate at the end of 60 months. Anyway, even with the 8% default for 2016 cohort, I am surprise to find FC claims projected annualised return for 2016 cohort is 5.0% - 5.5%.
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Post by shanghaiscouse on Mar 13, 2020 7:33:37 GMT
Well, my lifetime now is 56k interest, 5k fees, 46K DEFAULTS and 3k recoveries. 1.4% lifetime.
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richv
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Post by richv on Mar 13, 2020 10:21:39 GMT
Well, my lifetime now is 56k interest, 5k fees, 46K DEFAULTS and 3k recoveries. 1.4% lifetime. So by my maths: 56K - 5K - 46K + 3K = 8K earned so far. 8k earned = 1.4% if we use the 40% recoveries after 7 years, (some on here have reported getting 40%, it is of only tentative indication but is the best we have) 40% of 46K = 19K 19K (total recoveries) - 3k (recoveries so Far) = 16k (recoveries still to come) 8k earned so far + 16k recovery still to come = 24k (expected total earnings) = 4.2% (eventual lifetime) OK, That is highly speculative, and at best a 7 year wait is a long time, plus I don't know if you have any any/many late but not yet defaulted loans. But 4.2% is at the lower end but within the range if lifetime returns predicted by FC on their statistics page for 2017 and 2018 loans. Hope you manage to get at least that and hopefully better.
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Post by shanghaiscouse on Mar 13, 2020 10:48:50 GMT
Wow Rich, hope springs eternal as they say. I have no idea how anyone can come up with 40% after 7 years as nobody has experience of the risky cohorts that far out. The quality of the loan book massively deteriorated once they turned off discretion to get ready for the IPO and all through 2019. So nobody has any 7 year experience with these crappy 2018 and 2019 loans. The quality of earlier cohorts seemed to be far higher. My experience with recoveries is as follows: August 2019 -- bad debts of 26k, recoveries of 2k March 2020 -- bad debts of 46k, recoveries of 2.9k
So if you assume FIFO, then of the bad debts of 26k only £900 was recovered in the last 7 months. In the meantime an additional 20k of loans went bad.
Seriously, you can forget ever getting 40%, once a loan has gone bad for 18 months you basically aren't getting anything. FC put the bad loans out to agencies and there is only a certain amount of work it is worth them putting into it. In fact, how these agencies are incentivised is never disclosed to us but you can bet they won't want to be fighting 6 -7 year legal battles.
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