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Post by longnight21 on Jul 17, 2019 12:41:02 GMT
Has anyone any idea at what stage we are at .It's almost 18 months since this whole sorry saga started when will it end
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Post by mrclondon on Jul 17, 2019 13:12:04 GMT
A secured p2p loan once it reaches its maturity date on any platform will generally follow a number of stages
a) forebearance - cajolling the borrower to refinance might last 6 to 18 months if the borrower appears to be doing "something"
b) formal demand and appointment of receivers or administrators
c) dispoasl of asset(s) will generally take over 12 months but could be many years for an unattractive asset if there is no buyer at any price, or if it is challenged by the borrower in the courts
d) court action to claim on PG & professional indemity insurance - probably 2 years e) 5 year repayment plan for any succesful PG claim.
So, could be 5 to 10 years after the the loan's maturity date before the loan can be closed and the residual balance written off.
BDO in winding up the COL loan book are still at stages a) and b) and are just starting on c) in a few cases (such as Bolton & Loughborough Littleborough)
The only additional complication in the case of COL is that until the destroyed IT records can be re-assembled BDO are not able to payout the proceeds of the few loans that have redeemed over the last 18 months.
This is not the answer you were hoping for, but is what investing in secured loans means in reality. The collapse of the platform (be it COL or L) is an additional annoyance but doesn't fundamentally change the underlying processes compared to if the platform was still trading. An investment in any p2p loan (even one with a 6 month notional term) should be considered a long term investement of ten years plus, and one where there is a discrete chance you will lose your money in its entirity.
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tommytaylor
P2P - The new wild west
Posts: 234
Likes: 375
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Post by tommytaylor on Jul 17, 2019 15:58:43 GMT
A secured p2p loan once it reaches its maturity date on any platform will generally follow a number of stages
a) forebearance - cajolling the borrower to refinance might last 6 to 18 months if the borrower appears to be doing "something"
b) formal demand and appointment of receivers or administrators
c) dispoasl of asset(s) will generally take over 12 months but could be many years for an unattractive asset if there is no buyer at any price, or if it is challenged by the borrower in the courts
d) court action to claim on PG & professional indemity insurance - probably 2 years e) 5 year repayment plan for any succesful PG claim.
So, could be 5 to 10 years after the the loan's maturity date before the loan can be closed and the residual balance written off.
BDO in winding up the COL loan book are still at stages a) and b) and are just starting on c) in a few cases (such as Bolton & Loughborough)
The only additional complication in the case of COL is that until the destroyed IT records can be re-assembled BDO are not able to payout the proceeds of the few loans that have redeemed over the last 18 months.
This is not the answer you were hoping for, but is what investing in secured loans means in reality. The collapse of the platform (be it COL or L) is an additional annoyance but doesn't fundamentally change the underlying processes compared to if the platform was still trading. An investment in any p2p loan (even one with a 6 month notional term) should be considered a long term investement of ten years plus, and one where there is a discrete chance you will lose your money in its entirity.
Jesus mrclondon thanks for your very factual but seriously depressing post. So you give the interlopers your hard earned cash. They make a total pigs ear of investing it into decent secure loans. Finally cant cope and fall into admin and finally after 10 years you might be lucky if you get a fraction of your cash back. I would rather do a bank job and take my chance. You would be out after 10 but at least you still have your doe. What a steaming pile of P2P is.
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boundah
Member of DD Central
Posts: 367
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Post by boundah on Jul 17, 2019 17:02:17 GMT
A secured p2p loan once it reaches its maturity date on any platform will generally follow a number of stages...
...What a steaming pile of P2P is. I would't tar the whole P2P industry with the same brush as COL. We've had a couple of rough years, but those insightful/lucky enough to have been in the right loans on the right platforms have probably done OK. I've been investing across a few platforms since 2014 and have so far made a small profit, after taking defaults into account - certainly more than I would if I had stuck the same amount in a bank. More luck than insight, though.
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Post by brightspark on Jul 17, 2019 17:06:29 GMT
I think the more general thrust of enquiry towards the more knowledgeable in this community is are investors going to have to wait until every i is dotted and t crossed before repayments are received? i.e. is it the case that until everything is resolved nothing can be resolved. Investors obviously realised at the time of an investment that if a particular loan had a problem then matters might stall but few envisaged that problems with their entire portfolio might take 10 years to bring to fruition.
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Post by mrclondon on Jul 17, 2019 17:47:32 GMT
I think the more general thrust of enquiry towards the more knowledgeable in this community is are investors going to have to wait until every i is dotted and t crossed before repayments are received? i.e. is it the case that until everything is resolved nothing can be resolved. Investors obviously realised at the time of an investment that if a particular loan had a problem then matters might stall but few envisaged that problems with their entire portfolio might take 10 years to bring to fruition.
I'm going to veer off at a tangent intitally to Lendy land, bear with me ....
Lendy's administrators have indicated that funds will be returned to lenders as they are realised from the loans ... although there may still be a sizable delay before the first ones are actioned (i.e HQ) where the deductions for fees needs to be formalised (with the new independent administrator of SSSH). There is also funds from the Cornwall loan that they have said will be credited in full so they may appear very shortly.
Lendy's systems are still fully operational, and the intent seems to be that as soon as the regulatory issues are resolved, withdrawals will be actioned.
Some of Lendy's loans will be refinanced over the next 18 months and redeem at somewhere close to the full capital amount (before deductions for fees). But most of the loans will be subject to formal recovery action which will take many years to complete. Similiar to COL some of these are still at the forbearance stage, with some having reached asset disposal earlier this year e.g. Crewe dev, Scottish Gravel pit,Hull land, Glasgow/Bradford/Cardiff student land but there appears to have been no (acceptable) offers on any of these sites over the last few months.
Turning back to COL, there are aspects that differ from Lendy a) no 100% record of who owns which loan part b) no live systems for handling bank transfers c) possible missing/mislaid cash from undrawn loans d) no clarity on how the fees are to be deducted from loan repayments. Well on this last point the difference is Lendy's administrators have advised how they intend to proceduralise this. Without a resolution of these issues, it is not possible for the administrators to start to return funds. Hopefully before the next report (due April 2020) they will be able to complete the IT/forensic acountancy and repay the redeemed loans, but remember the worst case is they may ultimately decide it has to be on a flat % of loanbook in which case they would probably declare and pay an interim dividend each April.
There have been a few low value redemeptions from the COL loanbook thus far, barely more than the accrued costs to date.
What I think is perhaps being overlooked by some lenders is the appallingly poor assets against which many p2p loans are secured. We've seen this week Lendy's administrators estimating the per loan recoveries at a range of 7%-100% averaging 57%, this is very likely to be similiar at COL. But, the 100% recoveries will have already been achieved at COL, that is those loans that haven't required formal recovery action.
Put yourself in the shoes of the administrators who are accruing fees, but have visibility of the likely miniscule recoveries from some of the loans. How would you approach returning funds to lenders (fairly) whilst there is uncertainty on how much will be recovered from the loanbook and hence what % needs to be deducted to cover costs ?
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Post by mrclondon on Jul 17, 2019 18:10:28 GMT
...What a steaming pile of P2P is. I would't tar the whole P2P industry with the same brush as COL. We've had a couple of rough years, but those insightful/lucky enough to have been in the right loans on the right platforms have probably done OK. I've been investing across a few platforms since 2014 and have so far made a small profit, after taking defaults into account - certainly more than I would if I had stuck the same amount in a bank. More luck than insight, though. Hmm ... I 'liked' the post by tommytaylor as I'm rapidly coming to the same conclusion.
COL is indeed in league of its own, but set aside the poor behavior of the directors of this platform, and the underlying loans/assets/borrowers are all too representative of the wider p2p industry. I have been targeting a 6% return from p2p, but its looking more like 3% with zero or near zero recoveries on some of my loans with COL/L/FS/MT/TC/AC and major drag on returns due to the length of time recoveries take. Its been an interesting journey for me, but one I'm increasingly beginning to believe was pointless.
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Monetus
Member of DD Central
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Post by Monetus on Jul 17, 2019 21:23:09 GMT
An excellent and very thorough set of posts mrclondon - even if the contents aren't exactly what many will want to hear.
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Post by samford71 on Jul 17, 2019 22:39:03 GMT
Hmm ... I 'liked' the post by tommytaylor as I'm rapidly coming to the same conclusion.
COL is indeed in league of its own, but set aside the poor behavior of the directors of this platform, and the underlying loans/assets/borrowers are all too representative of the wider p2p industry. I have been targeting a 6% return from p2p, but its looking more like 3% with zero or near zero recoveries on some of my loans with COL/L/FS/MT/TC/AC and major drag on returns due to the length of time recoveries take. Its been an interesting journey for me, but one I'm increasingly beginning to believe was pointless.
I thought I was the P2P pessimist. Remember it's often the darkest before dawn.
Also remember that $13 trillion of global government bonds now have a negative yield. Germany just issued a new 10-year benchmark bond with a coupon of zero ... at a price of 102. Yes, you lend them 102 Euros for 10 years, in between they don't pay you a cent, and at the end they give you back 100 Euros. You can get a 20-year fixed rate mortage in Denmark at a negative rate (the borrower is paid by the lender). Some junk bonds in Euros are at negative rates. The Fed is going to cut rates. The ECB is going to cut rates and possibly do more QE. The BoE will probably cut rates (assuming Sterling doesn't disintegrate first).
You may look back in a year or two and wish you could still make a 3% return from P2P !
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hazellend
Member of DD Central
Posts: 2,361
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Post by hazellend on Jul 17, 2019 22:52:40 GMT
Hmm ... I 'liked' the post by tommytaylor as I'm rapidly coming to the same conclusion.
COL is indeed in league of its own, but set aside the poor behavior of the directors of this platform, and the underlying loans/assets/borrowers are all too representative of the wider p2p industry. I have been targeting a 6% return from p2p, but its looking more like 3% with zero or near zero recoveries on some of my loans with COL/L/FS/MT/TC/AC and major drag on returns due to the length of time recoveries take. Its been an interesting journey for me, but one I'm increasingly beginning to believe was pointless.
I thought I was the P2P pessimist. Remember it's often the darkest before dawn.
Also remember that $13 trillion of global government bonds now have a negative yield. Germany just issued a new 10-year benchmark bond with a coupon of zero ... at a price of 102. Yes, you lend them 102 Euros for 10 years, in between they don't pay you a cent, and at the end they give you back 100 Euros. You can get a 20-year fixed rate mortage in Denmark at a negative rate (the borrower is paid by the lender). Some junk bonds in Euros are at negative rates. The Fed is going to cut rates. The ECB is going to cut rates and possibly do more QE. The BoE will probably cut rates (assuming Sterling doesn't disintegrate first).
You may look back in a year or two and wish you could still make a 3% return from P2P !
Government bonds paying 0% seem preferable compared to 3% from P2p. Hopefully my returns will not plumb those depths. I’m pretty fed up with illiquid, frustrating investments. I’m trying to move back to an all equity:gov bond portfolio.
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bugs4me
Member of DD Central
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Post by bugs4me on Jul 18, 2019 18:47:29 GMT
Hmm ... I 'liked' the post by tommytaylor as I'm rapidly coming to the same conclusion.
COL is indeed in league of its own, but set aside the poor behavior of the directors of this platform, and the underlying loans/assets/borrowers are all too representative of the wider p2p industry. I have been targeting a 6% return from p2p, but its looking more like 3% with zero or near zero recoveries on some of my loans with COL/L/FS/MT/TC/AC and major drag on returns due to the length of time recoveries take. Its been an interesting journey for me, but one I'm increasingly beginning to believe was pointless.
'....You may look back in a year or two and wish you could still make a 3% return from P2P !....' Well maybe but mrclondon makes a valid point. Considering the amount of DD required and mrclondon possibly does more than most, it's really whether it's worth the time and effort.
Possibly all depends upon how much time you have on your hands and after wiping off 75% of my current zombie loans with 3 or 4 platforms then my IRR is currently sitting just shy of 5%. I was though involved in P2P early on so have the good years with Z and RS contributing to that IRR figure. Nonetheless it really all comes down to trust and confidence in some of the charlatans folks behind the platforms which I suggest is at an all time low. Reading the couple of articles regarding LY yesterday in The Times made for depressing reading and seemed to point the finger firmly at the founders/owners of the platform who were simply out of their depth.
So no, I do not believe with all the time and effort required 3% is anywhere near an acceptable figure. Hence my decision some 12 months ago to exit the P2P marketplace where possible and I have zero regrets regarding that decision.
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Godanubis
Member of DD Central
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 Jul 18, 2019 21:17:30 GMT
If I win the euromillions I’ll happily buy the loan book at capital cost +5% . Because I’m a nice guy There would still be sufficient £50+ Million for me to get by.
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Post by Ace on Jul 18, 2019 22:01:56 GMT
I'm surprised that people are quoting such low overall returns from p2p.
Personally I'm targeting 8%. My current average XIRR is 6.4%. (Calculated as a simple capital weighted average XIRR across all my p2p accounts. I'm just too lazy to calculate a proper overall XIRR as my data isn't organised in a way that would make it easy). This average is steadily rising. It's currently understated as I don't account for accrued interest before it's paid.
I do put a lot of effort in to managing by accounts, but I have no relevant training or expertise in finance, just a bit of common sense, a keen interest, and a bit of knowledge learnt from the forums. It's blatantly obvious to me that my DD skills are way behind that of many forumites, and I'm very grateful for their published hard work.
I definitely wouldn't bother with p2p if my returns were as low as 3%.
Perhaps I'm in some goldilocks zone, I'm only 17 months in to my p2p journey, where I've not been in long enough to suffer sufficient defaults to give a truly representative return. I guess time will tell.
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Post by brightspark on Jul 18, 2019 23:39:52 GMT
I think the more general thrust of enquiry towards the more knowledgeable in this community is are investors going to have to wait until every i is dotted and t crossed before repayments are received? i.e. is it the case that until everything is resolved nothing can be resolved. Investors obviously realised at the time of an investment that if a particular loan had a problem then matters might stall but few envisaged that problems with their entire portfolio might take 10 years to bring to fruition.
I'm going to veer off at a tangent intitally to Lendy land, bear with me ....
Lendy's administrators have indicated that funds will be returned to lenders as they are realised from the loans ... although there may still be a sizable delay before the first ones are actioned (i.e HQ) where the deductions for fees needs to be formalised (with the new independent administrator of SSSH). There is also funds from the Cornwall loan that they have said will be credited in full so they may appear very shortly.
Lendy's systems are still fully operational, and the intent seems to be that as soon as the regulatory issues are resolved, withdrawals will be actioned.
Some of Lendy's loans will be refinanced over the next 18 months and redeem at somewhere close to the full capital amount (before deductions for fees). But most of the loans will be subject to formal recovery action which will take many years to complete. Similiar to COL some of these are still at the forbearance stage, with some having reached asset disposal earlier this year e.g. Crewe dev, Scottish Gravel pit,Hull land, Glasgow/Bradford/Cardiff student land but there appears to have been no (acceptable) offers on any of these sites over the last few months.
Turning back to COL, there are aspects that differ from Lendy a) no 100% record of who owns which loan part b) no live systems for handling bank transfers c) possible missing/mislaid cash from undrawn loans d) no clarity on how the fees are to be deducted from loan repayments. Well on this last point the difference is Lendy's administrators have advised how they intend to proceduralise this. Without a resolution of these issues, it is not possible for the administrators to start to return funds. Hopefully before the next report (due April 2020) they will be able to complete the IT/forensic acountancy and repay the redeemed loans, but remember the worst case is they may ultimately decide it has to be on a flat % of loanbook in which case they would probably declare and pay an interim dividend each April.
There have been a few low value redemeptions from the COL loanbook thus far, barely more than the accrued costs to date.
What I think is perhaps being overlooked by some lenders is the appallingly poor assets against which many p2p loans are secured. We've seen this week Lendy's administrators estimating the per loan recoveries at a range of 7%-100% averaging 57%, this is very likely to be similiar at COL. But, the 100% recoveries will have already been achieved at COL, that is those loans that haven't required formal recovery action.
Put yourself in the shoes of the administrators who are accruing fees, but have visibility of the likely miniscule recoveries from some of the loans. How would you approach returning funds to lenders (fairly) whilst there is uncertainty on how much will be recovered from the loanbook and hence what % needs to be deducted to cover costs ? Without appearing to be unduly critical and accepting that you are trying to shed light on a difficult subject your expose does not answer the question of the basis on which the administrators have decided to make repayments and this is the nub of the matter. Yes we have had chapter and verse on the state of the records. If the records are not there then repayment will have to be on a % basis. If the records are there then repayment can be on a loan by loan basis. Someone has to make a decision. All we are having from Administrators is prevarication and waffle which looks increasingly like an excuse to milk lenders dry. Lenders knew that the loans were higher risk so no surprises there that fire sales will generate poor returns on capital. What lenders want is asset disposals not ever more reasons as to why very little can and appears to be happening.
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Post by mrclondon on Jul 19, 2019 0:08:56 GMT
I think one of my earlier posts has been badly misinterpreted / misunderstood ... so a quick explanation to help clarify:
My historical XIRR is around 8.5% based on p2p account balances as they stand today and cashflows over the last 13 years (I've only had 1 small TC loan and 1 small FS loan written off thus far and a few early Zopa/FC loans)
If I book what I expect as capital losses today, it drops the XIRR for the last 13 years to around 6% (i.e. reducing current account balances by expected write offs)
If I model zero interest on my distressed loans (currently 38% of p2p pot incl 13% I expect to be written off eventually) going forward over the next 7 years as the recoveries take place, and I make some assumptions about the performance of current non distressed loans I arrive at the conclusion my XIRR in 2026 for the twenty year period would be around 3%. (Model assumes no new loans after today, all repayments withdrawn from p2p).
I've now got nearly 40% of my p2p loans that will never earn another penny in interest, and the recoveries from those will come in dribs and drabs over the next ten years. Thats a hell of a lot of money sat idle for many years, which reduces the XIRR of the whole investment strategy progressively as each future year ticks by.
The point being that the 3% pa return I mentioned in my earlier post is my predicted return from p2p investing across the lifecycle of all my historical and current loans 2006-2026 assuming no new loans, despite my account balances as they stand today implying a 8.5% annual return over the 13 years.
A final point of clarification - the amount I have invested in p2p has increased in stages over the last 13 years, with the greatest jump 5 years ago when the endowment policy from my first house matured after 25 years.
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