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Post by df on Jul 22, 2019 14:27:30 GMT
"The sellers buys the microloan at the premium for the benefit of this reassurance. If the microloan fails into arrears by more then 60 days the lender that sold the microloan will buy it back. This gives the lender purchasing a buyback microloan peace of mind, and gives the issuing lender the ability to free up capital to invest in new lending opportunities." www.rebuildingsociety.com/buyback-guarantee/Sounds like a step forward. I've looked at some offers - premiums are very high, but might be worth for significant risk reduction. |
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optimist
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Post by optimist on Jul 27, 2019 14:05:43 GMT
"The sellers buys the microloan at the premium for the benefit of this reassurance. If the microloan fails into arrears by more then 60 days the lender that sold the microloan will buy it back. This gives the lender purchasing a buyback microloan peace of mind, and gives the issuing lender the ability to free up capital to invest in new lending opportunities." www.rebuildingsociety.com/buyback-guarantee/Sounds like a step forward. I've looked at some offers - premiums are very high, but might be worth for significant risk reduction. It's good to have the option and gives something else to consider when evaluating a SM loan.
I estimate that if 75% of their loans default the BBG seller will pay back most of their obligation after 5 years, At 50% they may take 3 yrs to pay it off. At 25% defaults it may take them a year. BBG availablity might be used as an indicator of a good loan - evaluated by a known rich or experienced investor, conversely offering a guarantee on some might be used to boost the SM value of the rest...
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09dolphin
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Post by 09dolphin on Jul 27, 2019 19:10:59 GMT
I'm not sure I like this "buyback" concept. If it was for only a limited period it would be acceptable but if it's for the period of the loan it seems to me that the seller is taking all the risk and the buyer absolutely none.
I do hope I have misunderstood the concept but there is nothing in the information about the "buyback" being for a limited period.
If the "buyback" is for the whole of the loan I will stop lending on new loans and only buy on the secondary market knowing that most, if not all, of my money will be totally safe. I suspect others will do the same so the new loans will have little or no chance of being funded. Ergo Rebs dies.
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Post by df on Jul 27, 2019 20:02:58 GMT
"The sellers buys the microloan at the premium for the benefit of this reassurance. If the microloan fails into arrears by more then 60 days the lender that sold the microloan will buy it back. This gives the lender purchasing a buyback microloan peace of mind, and gives the issuing lender the ability to free up capital to invest in new lending opportunities." www.rebuildingsociety.com/buyback-guarantee/Sounds like a step forward. I've looked at some offers - premiums are very high, but might be worth for significant risk reduction. It's good to have the option and gives something else to consider when evaluating a SM loan.
I estimate that at 75% default they will pay back most of their obligation after 5 years. At 50% they may take 3 yrs to pay it off. At 25% defaults it may take them a year. It might be used as an indicator of a good loan - evaluated by a known rich or experienced investor, conversely offering a guarantee on some might be used to boost the SM value ofr the rest...
I think in theory it is a good offer. Similar to investing in products with PF. One can probably earn 5%-7% with a "guarantee" for preservation of capital. No need to engage in any DD on loans if you're guaranteed to get your capital back after 60 days of arrears - easy investment. In this scenario it doesn't matter whether "rich or experienced" have enough expertise or not, but I've noticed some ridiculously high premiums started to appear without any BBG (good luck to them  ). Not sure how popular this will become, so far these BBG offerings are not flying off the shelf. Loan flow is very slow on Rebs as well as the existing loan book is fairly small, so somebody who wants to invest a lump sum (say10k) in fire-and-forget style they more likely to go for other options (AC access, LW, GS for example).
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Post by df on Jul 27, 2019 20:42:23 GMT
I'm not sure I like this "buyback" concept. If it was for only a limited period it would be acceptable but if it's for the period of the loan it seems to me that the seller is taking all the risk and the buyer absolutely none. I do hope I have misunderstood the concept but there is nothing in the information about the "buyback" being for a limited period. If the "buyback" is for the whole of the loan I will stop lending on new loans and only buy on the secondary market knowing that most, if not all, of my money will be totally safe. I suspect others will do the same so the new loans will have little or no chance of being funded. Ergo Rebs dies. I'm not sure what you mean by "limited period". It says "If the microloan fails into arrears by more then 60 days the lender that sold the microloan will buy it back". My understanding is - if I had no repayment for 2 months (whether it is caused by delay or default) I get my capital back. The risk is if the loan collapse soon I will be loosing what I paid as a premium. This is why I'm generally not keen on buying at premium and I don't think I will be participating in this new initiative.
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optimist
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Post by optimist on Jul 28, 2019 12:56:45 GMT
I'm not sure I like this "buyback" concept. If it was for only a limited period it would be acceptable but if it's for the period of the loan it seems to me that the seller is taking all the risk and the buyer absolutely none. I do hope I have misunderstood the concept but there is nothing in the information about the "buyback" being for a limited period. If the "buyback" is for the whole of the loan I will stop lending on new loans and only buy on the secondary market knowing that most, if not all, of my money will be totally safe. I suspect others will do the same so the new loans will have little or no chance of being funded. Ergo Rebs dies. I'm not sure what you mean by "limited period". It says "If the microloan fails into arrears by more then 60 days the lender that sold the microloan will buy it back". My understanding is - if I had no repayment for 2 months (whether it is caused by delay or default) I get my capital back. The risk is if the loan collapse soon I will be loosing what I paid as a premium. This is why I'm generally not keen on buying at premium and I don't think I will be participating in this new initiative. Buyback is an option offered on 40% of the portfolio of the bigger players so it won't be the majority of SM loans. The seller is taking most of the risk, and they charge perhaps 14% premium. on a 20% loan, leaving you 13.5% over the term. You lose 3/4 of your first year's interest and you don't get your premium back if it defaults but you get your capital. Same as an insurance policy.
It provides options for people who like to take more risk (and offer BBG) or less risk and pay for it. Seems like a good idea and the number of BBG loans appears to be increasing. Expecting falling interest rates overall (more competition for 20% loans) but less takeup of lower interest rates (why take a 12% if you can get 13.5% with a guarantee)
Interested to know of any other P2P that matches 13.5% with a guarantee to not lose your capital (AC max 12% looking for LW and GS)
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Post by df on Jul 28, 2019 19:04:26 GMT
I'm not sure what you mean by "limited period". It says "If the microloan fails into arrears by more then 60 days the lender that sold the microloan will buy it back". My understanding is - if I had no repayment for 2 months (whether it is caused by delay or default) I get my capital back. The risk is if the loan collapse soon I will be loosing what I paid as a premium. This is why I'm generally not keen on buying at premium and I don't think I will be participating in this new initiative. Buyback is an option offered on 40% of the portfolio of the bigger players so it won't be the majority of SM loans. The seller is taking most of the risk, and they charge perhaps 14% premium. on a 20% loan, leaving you 13.5% over the term. You lose 3/4 of your first year's interest and you don't get your premium back if it defaults but you get your capital. Same as an insurance policy.
It provides options for people who like to take more risk (and offer BBG) or less risk and pay for it. Seems like a good idea and the number of BBG loans appears to be increasing. Expecting falling interest rates overall (more competition for 20% loans) but less takeup of lower interest rates (why take a 12% if you can get 13.5% with a guarantee)
Interested to know of any other P2P that matches 13.5% with a guarantee to not lose your capital (AC max 12% looking for LW and GS) You can't earn 12% from AC unless you are prepared to risk investing in 593, 547, 546 and 544 for 1 remaining month. Generally speaking the era of 9%+ AC loans is long gone. LW is 6.5% and GS 5.3%.
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Post by Ace on Jul 28, 2019 21:46:27 GMT
Buyback is an option offered on 40% of the portfolio of the bigger players so it won't be the majority of SM loans. The seller is taking most of the risk, and they charge perhaps 14% premium. on a 20% loan, leaving you 13.5% over the term. You lose 3/4 of your first year's interest and you don't get your premium back if it defaults but you get your capital. Same as an insurance policy.
It provides options for people who like to take more risk (and offer BBG) or less risk and pay for it. Seems like a good idea and the number of BBG loans appears to be increasing. Expecting falling interest rates overall (more competition for 20% loans) but less takeup of lower interest rates (why take a 12% if you can get 13.5% with a guarantee)
Interested to know of any other P2P that matches 13.5% with a guarantee to not lose your capital (AC max 12% looking for LW and GS) You can't earn 12% from AC unless you are prepared to risk investing in 593, 547, 546 and 544 for 1 remaining month. Generally speaking the era of 9%+ AC loans is long gone. LW is 6.5% and GS 5.3%. GS pay 5.8% in their ISA.
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kaya
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Post by kaya on Jul 29, 2019 8:09:57 GMT
Hey that's a pretty innovative idea. I like it in principle, at least.
However, the blurb says: ''A buyback guarantee is a promise between one lender to another, to buyback the microloan in the event that the loan defaults
The sellers buys the microloan at the premium for the benefit of this reassurance. If the microloan fails into arrears by more then 60 days the lender that sold the microloan will buy it back. This gives the lender purchasing a buyback microloan peace of mind.''
Now either I am very dim or that is Rebs gibberish. Surely it should say: The buyer buys the microloan at a premium for the benefit of this reassurance.
(edit) The main risk may be, if the Rebs platform collapses, the buyback guarantees may not be honoured or enforced
(edit) Note to Rebs: the 'read more' button is not working. under 'total repayable/interest' some interest figures are showing as negative values.
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Greenwood2
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Post by Greenwood2 on Jul 29, 2019 9:47:11 GMT
I haven't used Rebs for a long time, but might be tempted by this. I can't see any loans near 13.5% interest with the BBG though, but I may not be understanding the secondary market screen (I haven't looked for years!) when I looked they seemed to be more like 5%. The loans would have to be good for a while to get back the premium paid in interest and loans would be dead money for about 3 months before getting your capital back if in default, for 13% it would be worth a punt, but not at 5%, can someone explain the rates or give an example?
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optimist
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Post by optimist on Jul 29, 2019 18:41:33 GMT
I haven't used Rebs for a long time, but might be tempted by this. I can't see any loans near 13.5% interest with the BBG though, but I may not be understanding the secondary market screen (I haven't looked for years!) when I looked they seemed to be more like 5%. The loans would have to be good for a while to get back the premium paid in interest and loans would be dead money for about 3 months before getting your capital back if in default, for 13% it would be worth a punt, but not at 5%, can someone explain the rates or give an example? Simplest way is to filter by highest buyer rate then pick the top one with the shield icon indicating buyback guarantee. When I checked 5 mins ago, the top one was L* B***** L****** offering 13.6% with BBG.
Without BBG you get 18% with 4% premium but with BBG you pay 14% premium so you have no profit for 9 months but as it's a 5 yr loan, you then get 4 1/4 yrs of 19% or thereabouts.
The interest rate shown will be an average over the term of the loan. If you choose to sell the loan then you sell it with the originall sellers BBG IE the guarantee is tranferrable so you can expect to be able to charge some premium roughly proportional to the remaining term.
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optimist
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Post by optimist on Jul 29, 2019 18:45:23 GMT
Hey that's a pretty innovative idea. I like it in principle, at least.
However, the blurb says: ''A buyback guarantee is a promise between one lender to another, to buyback the microloan in the event that the loan defaults
The sellers buys the microloan at the premium for the benefit of this reassurance. If the microloan fails into arrears by more then 60 days the lender that sold the microloan will buy it back. This gives the lender purchasing a buyback microloan peace of mind.''
Now either I am very dim or that is Rebs gibberish. Surely it should say: The buyer buys the microloan at a premium for the benefit of this reassurance.
(edit) The main risk may be, if the Rebs platform collapses, the buyback guarantees may not be honoured or enforced
(edit) Note to Rebs: the 'read more' button is not working. under 'total repayable/interest' some interest figures are showing as negative values.
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First bit looks like a typo. If the platform collapses then there is no reason the backup company that steps in can't enforce the original agreement which is between seller and buyer and secured against the seller's other loans. Agree that needs confirmation. Can anyone think of anything else that might go wrong?
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Greenwood2
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Post by Greenwood2 on Jul 29, 2019 19:37:51 GMT
I haven't used Rebs for a long time, but might be tempted by this. I can't see any loans near 13.5% interest with the BBG though, but I may not be understanding the secondary market screen (I haven't looked for years!) when I looked they seemed to be more like 5%. The loans would have to be good for a while to get back the premium paid in interest and loans would be dead money for about 3 months before getting your capital back if in default, for 13% it would be worth a punt, but not at 5%, can someone explain the rates or give an example? Simplest way is to filter by highest buyer rate then pick the top one with the shield icon indicating buyback guarantee. When I checked 5 mins ago, the top one was L* B***** L****** offering 13.6% with BBG.
Without BBG you get 18% with 4% premium but with BBG you pay 14% premium so you have no profit for 9 months but as it's a 5 yr loan, you then get 4 1/4 yrs of 19% or thereabouts.
The interest rate shown will be an average over the term of the loan. If you choose to sell the loan then you sell it with the originall sellers BBG IE the guarantee is tranferrable so you can expect to be able to charge some premium roughly proportional to the remaining term.
9 months to get to break even doesn't seem great. These high risk loans are not a good bet for 9 months+ let alone 5 years. But selling on does seem like a viable possibility.
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optimist
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Post by optimist on Jul 29, 2019 20:16:22 GMT
Simplest way is to filter by highest buyer rate then pick the top one with the shield icon indicating buyback guarantee. When I checked 5 mins ago, the top one was L* B***** L****** offering 13.6% with BBG.
Without BBG you get 18% with 4% premium but with BBG you pay 14% premium so you have no profit for 9 months but as it's a 5 yr loan, you then get 4 1/4 yrs of 19% or thereabouts.
The interest rate shown will be an average over the term of the loan. If you choose to sell the loan then you sell it with the originall sellers BBG IE the guarantee is tranferrable so you can expect to be able to charge some premium roughly proportional to the remaining term.
9 months to get to break even doesn't seem great. These high risk loans are not a good bet for 9 months+ let alone 5 years. But selling on does seem like a viable possibility. Check my maths but as a buyer, assuming 12% default rate over the term and that it's the same throughout, I have roughly 2% chance of losing my 14% in the time before I break even and I'm making interest during that time so the amount I lose on average is around 7%. I'd guess the seller has done DD or they wouldn't offer BBG so the chances may be better than that. Seems good to me.
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kaya
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Post by kaya on Jul 30, 2019 6:48:45 GMT
Well Rebs must have had extensive consultation with HNW lenders before setting this up. The possibility of selling the loan on later with the BBG intact seems attractive. It would be even more attractive if large loan parts could be split up, but Rebs have never facilitated this.
The main risk is probably platform failure, where the administrators then consider your private loans to be theirs to plunder. Another risk is multiple defaults occurring where the Guarantor no longer has enough balance of funds on account to cover the losses.
And really, could Rebs not perform a simple script-check before posting stuff on their website? It is So unproffessional.
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