Various Loan Updates (Assetz Capital)

I agree that the quality of duedil is likely to fall.  At the margin this will reduce my propensity to invest on AC, relative to TC - certainly if the rates are lower as well.

AIUI, underwriters are required to release at least 50% of their holding at drawdown so unless there isn't enough demand to absorb all that is released -- and that hasn't been a problem of late, though it could be with the £6M loan due to draw down on Friday -- they might have a significant position immediately after drawdown but they shouldn't have a majority. 

As to what happens after that, I can only speculate.  Underwriters usually provide the service they do because of the fees they earn rather than because they wish to hold those loan parts long-term.  Therefore, I'd expect them to release more of their holdings as soon as they're presented with another underwriting opportunity that they find attractive.  As a result, by the time a loan gets into difficultly, and a vote is called, I'd expect there to be very few parts still being held by underwriters.

Which brings up an interesting question...  When the QAA/GEIA/GBBA are holding parts of loans where a vote has been called, who votes those parts? 

AC?  The actual holders of those parts?  In the case of the latter, all parts held by the GEIA/GBBA are assigned to specific owners, so they could be asked to vote, but that would be inconsistent with AC's 'black box' vision of those accounts, where investors aren't told what loans they're invested in and where investors aren't supposed to need to know about any borrower problems and thus probably won't have a clue which way they should vote -- or, for that matter, care because they're protected by the PF.  The QAA is even more black box in operation, since investors' QAA statements don't show which parts of which loans they 'own', though AC could attribute parts to investors simply by taking the proportion of the investors' holdings to the whole QAA balance and applying that to the entire QAA holding of any particular loan.  Still, it would seem to make very little sense for AC to be asking QAA investors to vote.

So do AC vote those parts on behalf of their investors?  Or are those parts disenfranchised, becoming part of the 'No Vote' total when voting results are reported?  ISTM that AC wouldn't want to do the former for the same reason they don't want to give MLIA investors the option of giving a proxy over their vote to AC for them to vote for whatever they thought was the best way forward -- AC want to stay completely neutral in all voting situations, and not make any suggestions as to which way they feel a vote ought to go.

This leads me to suspect that QAA/GEIA/GBBA parts do not get voted at all, but I'd appreciate AC (andrewholgate or some other delegate) clarifying the situation.

Well, that may (or may not :-) have been true in the past, but it's what's happening now is what counts.  AC have stated there are many sources of underwriting now and several forum users claim that a large number of recent loans have been underwritten by the QAA.   Also an old-style underwriter has said just now that there's been nothing on offer over the last few months, so the fees really don't come close to the loss of interest through underwriting.

AC's model has changed.  I really wouldn't like to say what the current modus operandi is, but I hope it settles down soon so that everyone feels comfortable.

I've posted a few times on this subject since my partner holds a GBBA and has never voted since she knows nothing about the loans.
I tried to find out more but unfortunately it drew a blank p2pindependentforum.com/thread/3725/votes-gbba-lenders-having-influence

Lenders do not participate in loans in the QAA, so does this implicitly abstain from all votes? ... or is each QAA investor given a pro-rata share of the QAA's "vote" for its investment?

It abstains.

No as the QAA doesn't own large amounts of the more historic loans.