bg
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Post by bg on Dec 11, 2015 13:27:41 GMT
I didn't vote on this proposal. I would like to see more loans through the platform but as a current holder of the loan I can see that adding a second charge increases the chances of a forced sale of the security by the second charge holder. Any sale of the asset at a distressed price increases the chance of me losing money. The mind boggles at a possible scenario where a second charge holder might force a sale at a price that puts them out of the money completely (not even sufficient funds to repay the first charge holder). If only it was so simple to forecast what may happen in the future.
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mikes1531
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Post by mikes1531 on Dec 11, 2015 14:00:18 GMT
Is it even AC's intention to be underwriting loans using the QAA? It's very risky for them. How about if in the weeks leading up to drawdown there is a drain in excess cash in the QAA so there isn't enough cash to draw the loan? Even worse, do they want a large concentration in one loan..what if it defaults before the QAA holding is reduced? Then the QAA will be jammed with angry investors unable to withdraw their cash. The loan doesn't even need to default..what if there is a large amount of withdrawals from the QAA soon after drawdown which the QAA can't meet? There are all sorts of scenarios which could play out badly if they go down this route. AFAIK, AC never have said they would use the QAA for underwriting. But underwriters have reported in this forum that some of the recent loans were not offered to them, so AC must have funded them from other sources. Maybe they're using their institutional investors. AC have said that much of the QAA is uninvested, so it ought to be able to stand quite a 'run'. AC know how much of what's in the QAA is via direct investment, and that's probably a lot more likely to stay in the account than swept funds. AC know the level of pre-bids for all upcoming loans. If a loan is oversubscribed, AC can be pretty sure that if it used the QAA to underwrite that loan, the QAA wouldn't need to be holding any of those loan parts for more than about 24 hours. If a loan is undersubscribed, AC could arrange underwriting to prevent the QAA having to hold potentially illiquid loan parts. In short, AC have the tools to manage the risks associated with using the QAA for underwriting. If they use them carefully they could save a lot of underwriting fees and, IMHO, that sounds like a sensible business plan.
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bg
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Post by bg on Dec 11, 2015 15:07:14 GMT
Is it even AC's intention to be underwriting loans using the QAA? It's very risky for them. How about if in the weeks leading up to drawdown there is a drain in excess cash in the QAA so there isn't enough cash to draw the loan? Even worse, do they want a large concentration in one loan..what if it defaults before the QAA holding is reduced? Then the QAA will be jammed with angry investors unable to withdraw their cash. The loan doesn't even need to default..what if there is a large amount of withdrawals from the QAA soon after drawdown which the QAA can't meet? There are all sorts of scenarios which could play out badly if they go down this route. AFAIK, AC never have said they would use the QAA for underwriting. But underwriters have reported in this forum that some of the recent loans were not offered to them, so AC must have funded them from other sources. Maybe they're using their institutional investors. AC have said that much of the QAA is uninvested, so it ought to be able to stand quite a 'run'. AC know how much of what's in the QAA is via direct investment, and that's probably a lot more likely to stay in the account than swept funds. AC know the level of pre-bids for all upcoming loans. If a loan is oversubscribed, AC can be pretty sure that if it used the QAA to underwrite that loan, the QAA wouldn't need to be holding any of those loan parts for more than about 24 hours. If a loan is undersubscribed, AC could arrange underwriting to prevent the QAA having to hold potentially illiquid loan parts. In short, AC have the tools to manage the risks associated with using the QAA for underwriting. If they use them carefully they could save a lot of underwriting fees and, IMHO, that sounds like a sensible business plan. The recent loans that have bypassed the underwriters have been funded by a new institutional lender. AC can't see any pre-bids until the loan is fully underwritten so they would have to gamble there was sufficient demand to underwrite using the QAA. I don't think they would be willing to risk it.
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kermie
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Post by kermie on Dec 11, 2015 16:20:25 GMT
AC can't see any pre-bids until the loan is fully underwritten so they would have to gamble there was sufficient demand to underwrite using the QAA. I don't think they would be willing to risk it. I see no technical reason why AC could not see all current bids against loans that are yet-to-drawdown. Combined with what cash is available should give AC a very good idea of what sort of separate underwriting is necessary. AC may have chosen to use separate institutional underwriters for political and long-term reasons, but in the short term the QAA could supply much of the underwriting for smaller loans (assuming the pace of new loan drawdowns is not too frequent - give lenders a chance to replenish their QAA....perhaps that's one reason why AC want to put in place non-QAA underwriting funds - since they clearly want to have a significant beat rate!)
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bg
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Post by bg on Dec 11, 2015 16:24:53 GMT
AC can't see any pre-bids until the loan is fully underwritten so they would have to gamble there was sufficient demand to underwrite using the QAA. I don't think they would be willing to risk it. I see no technical reason why AC could not see all current bids against loans that are yet-to-drawdown. Combined with what cash is available should give AC a very good idea of what sort of separate underwriting is necessary. AC may have chosen to use separate institutional underwriters for political and long-term reasons, but in the short term the QAA could supply much of the underwriting for smaller loans (assuming the pace of new loan drawdowns is not too frequent - give lenders a chance to replenish their QAA....perhaps that's one reason why AC want to put in place non-QAA underwriting funds - since they clearly want to have a significant beat rate!) They can't see bids against a non underwritten loan because loans do not show on the website unless they are an auction for underwriters (in which case retail can't set a target as they can't see the loan) or they are fully underwritten.
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oldgrumpy
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Post by oldgrumpy on Dec 11, 2015 16:26:19 GMT
AC can't see any pre-bids until the loan is fully underwritten so they would have to gamble there was sufficient demand to underwrite using the QAA. I don't think they would be willing to risk it. I see no technical reason why AC could not see all current bids against loans that are yet-to-drawdown. Combined with what cash is available should give AC a very good idea of what sort of separate underwriting is necessary. AC may have chosen to use separate institutional underwriters for political and long-term reasons, but in the short term the QAA could supply much of the underwriting for smaller loans (assuming the pace of new loan drawdowns is not too frequent - give lenders a chance to replenish their QAA....perhaps that's one reason why AC want to put in place non-QAA underwriting funds - since they clearly want to have a significant beat rate!) What bg means is AC cannot see any pre-bids until the loan is fully underwritten, because we no longer see the loans to place our bids until after the loan is already fully underwritten. There is just a handful of loans remaining which pre-date this policy. Oh, bg beat me to it 
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kermie
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Post by kermie on Dec 11, 2015 16:29:51 GMT
Ah - understood. I guess in that case I would say - AC could consider advertising loans in preview mode even without full underwriting in place - in the knowledge that if they give retail lenders a few days then they will set targets and be fed from mostly QAA funds. Hmm - come to think of it - that's very much like what was happening in the old days with pre-bids for retail lenders!! I'll go away now...  |
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mikeb
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Post by mikeb on Dec 11, 2015 18:56:33 GMT
I assume default interest from 9/14-7/15 is still outstanding Correct ... Q&A says this is a "manual process" and will happen "next week" (so by 18 dec?) Amount paid == amount accrued "on the books", which doesn't include the extra +3% for the period you mention, which was never shown in the rate (10% remained when it should be 13%), and so never officially accrued.
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mikes1531
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Post by mikes1531 on Dec 11, 2015 20:04:54 GMT
They can't see bids against a non underwritten loan because loans do not show on the website unless they are an auction for underwriters (in which case retail can't set a target as they can't see the loan) or they are fully underwritten. I accept that is the current situation. But that is the result of a procedural change that AC made when it suited them. That was before the QAA existed, and I can see no reason why -- if it suited them -- AC couldn't change their procedures again and add loans to the Upcoming list when they're about a week from drawdown -- but before underwriting had been arranged/settled. They could then look at the level of retail pre-bids and decide whether to use the QAA for underwriting or an institutional source -- or a bit of both. In short, it's AC's game and they make the rules!
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jonah
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Post by jonah on Dec 11, 2015 22:13:59 GMT
They can't see bids against a non underwritten loan because loans do not show on the website unless they are an auction for underwriters (in which case retail can't set a target as they can't see the loan) or they are fully underwritten. I accept that is the current situation. But that is the result of a procedural change that AC made when it suited them. That was before the QAA existed, and I can see no reason why -- if it suited them -- AC couldn't change their procedures again and add loans to the Upcoming list when they're about a week from drawdown -- but before underwriting had been arranged/settled. They could then look at the level of retail pre-bids and decide whether to use the QAA for underwriting or an institutional source -- or a bit of both. In short, it's AC's game and they make the rules! I believe that idea was suggested in a thread. It was more to allow for a bit of crowd due diligence but would also provide the benefit as suggested. I can see AC quite liking to have a view of the pre funding bids before something goes live...
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Mike
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Post by Mike on Dec 12, 2015 6:16:54 GMT
I think AC are unlikely to risk QAA funds to fully underwrite new loans. More likely the QAA would underwrite the amount it plans to hold and never sell anything IMO.
AC love to colour well inside the lines and it would seem a bit out of character if they started using QAA to underwrite with the intention of selling parts post-drawdown.
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pikestaff
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Post by pikestaff on Dec 12, 2015 8:12:13 GMT
I see no reason whatsoever why AC should not be using the QAA for underwriting. I'd expect them to have limits for it (just as they will for direct lending) in order to manage their risk, and I'd expect those limits to vary with conditions. But when there is a lot of unmet demand in the GBBA and GEIA those limits could be reasonably high.
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mikes1531
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Post by mikes1531 on Dec 12, 2015 22:11:41 GMT
I think AC are unlikely to risk QAA funds to fully underwrite new loans. More likely the QAA would underwrite the amount it plans to hold and never sell anything IMO. AC love to colour well inside the lines and it would seem a bit out of character if they started using QAA to underwrite with the intention of selling parts post-drawdown. I expect AC will use the QAA for underwriting many of their upcoming loans. A £500k loan represents 14% of the current QAA size, and many of the recent new loans have been smaller than that. As drawdown approaches, AC can see how much has been committed to pre-bids in MLIAs, and as long as that's a reasonable amount AC can underwrite the whole of a small loan and be confident that they can transfer at least half of the loan to the MLIAs -- and possibly to the GEIAs or GBBAs -- as soon as drawdown occurs. That would leave something no more than 7% of the QAA in a single loan and that doesn't strike me as an overly large amount. For loans smaller than £500k -- or in situations where AC choose to release more than 50% of a new loan at drawdown -- the percentage would be even lower. In short, IMHO AC don't need to sacrifice QAA diversity in order to use the QAA for underwriting a large proportion of their upcoming loans.
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bg
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Post by bg on Dec 12, 2015 22:22:31 GMT
I think AC are unlikely to risk QAA funds to fully underwrite new loans. More likely the QAA would underwrite the amount it plans to hold and never sell anything IMO. AC love to colour well inside the lines and it would seem a bit out of character if they started using QAA to underwrite with the intention of selling parts post-drawdown. I expect AC will use the QAA for underwriting many of their upcoming loans. A £500k loan represents 14% of the current QAA size, and many of the recent new loans have been smaller than that. As drawdown approaches, AC can see how much has been committed to pre-bids in MLIAs, and as long as that's a reasonable amount AC can underwrite the whole of a small loan and be confident that they can transfer at least half of the loan to the MLIAs -- and possibly to the GEIAs or GBBAs -- as soon as drawdown occurs. That would leave something no more than 7% of the QAA in a single loan and that doesn't strike me as an overly large amount. For loans smaller than £500k -- or in situations where AC choose to release more than 50% of a new loan at drawdown -- the percentage would be even lower. In short, IMHO AC don't need to sacrifice QAA diversity in order to use the QAA for underwriting a large proportion of their upcoming loans. Except you can't actually set a target against a loan until it is fully underwritten.
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mikes1531
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Post by mikes1531 on Dec 12, 2015 22:30:30 GMT
I expect AC will use the QAA for underwriting many of their upcoming loans. A £500k loan represents 14% of the current QAA size, and many of the recent new loans have been smaller than that. As drawdown approaches, AC can see how much has been committed to pre-bids in MLIAs, and as long as that's a reasonable amount AC can underwrite the whole of a small loan and be confident that they can transfer at least half of the loan to the MLIAs -- and possibly to the GEIAs or GBBAs -- as soon as drawdown occurs. That would leave something no more than 7% of the QAA in a single loan and that doesn't strike me as an overly large amount. For loans smaller than £500k -- or in situations where AC choose to release more than 50% of a new loan at drawdown -- the percentage would be even lower. In short, IMHO AC don't need to sacrifice QAA diversity in order to use the QAA for underwriting a large proportion of their upcoming loans. Except you can't actually set a target against a loan until it is fully underwritten. AC can change that policy at the drop of a hat! But I also expect they can predict with a reasonable degree of accuracy what the MLIA interest will be like.
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