arby
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Post by arby on Oct 24, 2019 12:18:59 GMT
Just my opinion but people on this thread are now being very optimistic about the recovery prospects on these loans. One poster said that the issue is not the loans security but recoveries being kicked down the road - I just don't agree with this. What we have actually seen on most loans is that recovery is kicked down the road and then we discover that the underlying security is not what we thought. I hope we all see a great recovery, but administration or not, almost all of at least my loanbook looked entirely rotten. I have not felt like I would receive a decent recovery for a long time. That is because all the better loans are typically successfully redeemed or recovered without much fuss or attention. By their nature, the problematic loans will be the ones that receive most of the can kicking and discussion on here. A very large development project took a giant step to completion a few days ago with ~16 out of 19 properties sold and funds already distributed to lenders. I received that money and withdrew it the night before administration. I don't believe there was a single mention of this good result on the board. I'm not saying all loans are easy to recover, but a lot of the more recent loans should trundle along to a positive conclusion, with the key question of administrator's fees hanging over their heads...
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Post by mrclondon on Oct 24, 2019 12:38:34 GMT
Just my opinion but people on this thread are now being very optimistic about the recovery prospects on these loans. One poster said that the issue is not the loans security but recoveries being kicked down the road - I just don't agree with this. What we have actually seen on most loans is that recovery is kicked down the road and then we discover that the underlying security is not what we thought. I hope we all see a great recovery, but administration or not, almost all of at least my loanbook looked entirely rotten. I have not felt like I would receive a decent recovery for a long time. on some of these loans
Recoveries across the loan book will range from 0% to 100%. (cf Lendy's administrator's suggesting 7% - 100% for that loanbook)
I've argued consistently on this forum that I don't believe self select p2p loans are appropriate for retail investors. In years past I've been condemned for such views with practically zero support on here. I happen to believe it is close to impossible for investors to correctly assess risk of default and loss on default ... I get it right most of the time and avoid most of the disasters, but that is after many hours of research and ongoing monitoring of each and every loan I invest in. (I still though end up in a fair few disasters - such as Lendy Huddersfield, and MT/FS race cars & associated assets)
It is inevitable that just relying on the (limited) info that is provided by the platform to make decisions is going to lead to a loan portfolio that includes potential disasters. Its also inevitable that seeing disasters in a loan portfolio is going to cloud the view of the platform's loanbook as a whole.
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hendragon
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Post by hendragon on Oct 24, 2019 13:00:46 GMT
Interesting point mrclondon. It might also be worth mentioning that FS began as a niche lender mainly of "bling", and an online peer to peer style pawnbroker. The move into the property loans was driven (IMHO) by investor demand and an inability of FS to fulfill that demand with the original style of loan. |
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ceejay
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Post by ceejay on Oct 24, 2019 14:49:15 GMT
There may not be much at the moment, but as loans are completed (there are some which will pay), the fees/interest which would have gone to FS will now go to pay for the administrators. It may well be that creditors won't see a single penny, but investors (assuming the loans are properly ring-fenced) should see the same returns as if FS were still collecting the payments - perhaps even better if the administrators are better at collecting debts than the original management were. Remember that FS's fees are further down the queue than investors, and I don't believe that should change as a result of the administration. Of course, I guess it's possible that the administrators could appoint themselves (or some chums) as receivers on the loans themselves - these fees are paid before investors and will likely run very high - though there's no real reason to believe they'll be any higher than under FS. (All the above is speculation from someone completely unqualified to make it....) That's fair enough, even though I wonder how FS's fees can be sufficient to pay for the administrators' fees and salary of the employees that will stay on board during the wind down. After all, the reason they entered administration is that the business is no longer viable... ... One difference between the Administrators' costs and what the platforms would have been is that the Administrators have no liability for any issues that might have arisen from existing loans - for example if any lenders (or indeed anyone else) had had a case to sue them for any reason. The Administration cleanly wipes all of those liabilities off the slate, AFAIK, which could make all the difference.
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Post by crystal on Oct 24, 2019 14:49:56 GMT
Regarding some property valuations - many were made on an open market basis with reasonable expectation of PP being obtained (which in itself was maybe not reasonable). A very quick analysis shows these valuations were between 200-300% over the actual market value (visible in the land registry deeds). The Southampton property is a good example. It is doubtful that much more than the original price paid (circa £600k) would be realised - even with the recent PP in place.
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blender
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Post by blender on Oct 24, 2019 15:36:41 GMT
Just my opinion but people on this thread are now being very optimistic about the recovery prospects on these loans. One poster said that the issue is not the loans security but recoveries being kicked down the road - I just don't agree with this. What we have actually seen on most loans is that recovery is kicked down the road and then we discover that the underlying security is not what we thought. I hope we all see a great recovery, but administration or not, almost all of at least my loanbook looked entirely rotten. I have not felt like I would receive a decent recovery for a long time. on some of these loans
Recoveries across the loan book will range from 0% to 100%. (cf Lendy's administrator's suggesting 7% - 100% for that loanbook)
I've argued consistently on this forum that I don't believe self select p2p loans are appropriate for retail investors. In years past I've been condemned for such views with practically zero support on here. I happen to believe it is close to impossible for investors to correctly assess risk of default and loss on default ... I get it right most of the time and avoid most of the disasters, but that is after many hours of research and ongoing monitoring of each and every loan I invest in. (I still though end up in a fair few disasters - such as Lendy Huddersfield, and MT/FS race cars & associated assets)
It is inevitable that just relying on the (limited) info that is provided by the platform to make decisions is going to lead to a loan portfolio that includes potential disasters. Its also inevitable that seeing disasters in a loan portfolio is going to cloud the view of the platform's loanbook as a whole.
When the evidence accumulates, we have to reconsider our opinions. I am beginning to think that the new FSA rules are right. Just on platform risk, I don't think that we could have predicted the Coll failure, but it happened. However, I just cannot see why anyone reading this forum over the last couple of years could have put money through FS without knowing that it might be mostly lost through loan or platform failure, and without accepting that high risk. Anyone in a financial mess because of FS failure really needs protecting from themselves. I was not in Coll, by luck, or Lendy or FS, by definite choice, and have not lost cash elsewhere on self select loans, but it increasingly looks like dodging bullets. Even some loans where the risk is stupid, imo, get filled despite dire warnings on this forum (other platforms). So I have moved most cash to lower-rate spread-risk sites and am just keeping as much as I am willing to lose in the self-select high-rate loans, despite having lost nothing, yet. I do agree about the 'retail' lender, now.
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Post by mrclondon on Oct 24, 2019 16:09:57 GMT
Regarding some property valuations - many were made on an open market basis with reasonable expectation of PP being obtained (which in itself was maybe not reasonable). A very quick analysis shows these valuations were between 200-300% over the actual market value (visible in the land registry deeds). The Southampton property is a good example. It is doubtful that much more than the original price paid (circa £600k) would be realised - even with the recent PP in place. Yes, I pretty much agree, but as MT pointed out in the Q&A for the recently withdrawn Hotel loan, residual value valuations are how development sites are valued.
The Southampton valuation (para L.01) clearly states its a residual value valuation based on GDV determined by capitalisation of the rents on 22 units, and (para L.02) that the resulting valuation is assuming planning is granted. Whilst some VR's aren't that clear on the valuation basis, this one was. (I have no reason to doubt the figure calculated of just over £3m based on the assumptions stated.)
The issue has been not the valuations per se, but the LTV's of the loan. A 15% LTV loan against the c. £3m valuation would have been the point I would have considered this an appropriate loan for retail investors (i.e. c. 70% of the as is value, which as you say can be assumed to be around £600k).
Few people realised the loan was over 200% of what the site was likely to realise in a fire sale situation.
(For clarity I'm taking no view on the effect of this years planning approval for a 12 bed scheme. I'm referencing the situation at loan drawdown, and subsequent renewals.)
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Post by crystal on Oct 24, 2019 17:25:32 GMT
I agree - thanks for expanding on this point. For Southampton para L04 of the report is the - in my opinion - unequivocally negligent part of the report which warrants further thought. For a site that sold for £600k, there is no way it could be worth more than 3 times that shortly afterwards.
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Post by steve11 on Oct 24, 2019 19:48:00 GMT
I read an interesting article just now.
The Big Question: will lenders lose their money lent through FundingSecure?
Of course, the failure of FundingSecure will have no bearing on the businesses that borrowed money via its platform, which still owe the lenders. Hence, it's crucial to note that it's highly unlikely lenders will lose a lot of their money lent via FundingSecure as a result of its closure – so please relax and take a deep breath.
Indeed, many regulated peer-to-peer lending platforms have closed over the past five years. Although most were not substantial as FundingSecure, most of them have still ensured that lenders receive all or most of the money and interest that was owed to them.
Depending on the quality of the underlying loans, the value of assets used as security for loans, and CGRL's ability to recover bad debts, some FundingSecure investors might lose a variable proportion of the money and interest due to them as a result of borrowers becoming unable to pay. But this is always the case in peer-to-peer lending, even for active, thriving P2P lending businesses. Then again, this risk applies to all manner of investing, because only savings accounts are 100% secure.
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Post by mrclondon on Oct 24, 2019 19:59:44 GMT
I read an interesting article just now. The Big Question: will lenders lose their money lent through FundingSecure? Of course, the failure of FundingSecure will have no bearing on the businesses that borrowed money via its platform, which still owe the lenders. Hence, it's crucial to note that it's highly unlikely lenders will lose a lot of their money lent via FundingSecure as a result of its closure – so please relax and take a deep breath. Indeed, many regulated peer-to-peer lending platforms have closed over the past five years. Although most were not substantial as FundingSecure, most of them have still ensured that lenders receive all or most of the money and interest that was owed to them. Depending on the quality of the underlying loans, the value of assets used as security for loans, and CGRL's ability to recover bad debts, some FundingSecure investors might lose a variable proportion of the money and interest due to them as a result of borrowers becoming unable to pay. But this is always the case in peer-to-peer lending, even for active, thriving P2P lending businesses. Then again, this risk applies to all manner of investing, because only savings accounts are 100% secure. I've read that before substituting platform name and administrator. I believe the original text was actually written for the failure of a non-UK platform a couple of years ago. Personally I would just ignore this completely, and treat the editors of where ever you discovered this with a healthy dose of sceptism.
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arby
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Post by arby on Oct 24, 2019 20:50:22 GMT
I read an interesting article just now. The Big Question: will lenders lose their money lent through FundingSecure? Of course, the failure of FundingSecure will have no bearing on the businesses that borrowed money via its platform, which still owe the lenders. Hence, it's crucial to note that it's highly unlikely lenders will lose a lot of their money lent via FundingSecure as a result of its closure – so please relax and take a deep breath. Indeed, many regulated peer-to-peer lending platforms have closed over the past five years. Although most were not substantial as FundingSecure, most of them have still ensured that lenders receive all or most of the money and interest that was owed to them. Depending on the quality of the underlying loans, the value of assets used as security for loans, and CGRL's ability to recover bad debts, some FundingSecure investors might lose a variable proportion of the money and interest due to them as a result of borrowers becoming unable to pay. But this is always the case in peer-to-peer lending, even for active, thriving P2P lending businesses. Then again, this risk applies to all manner of investing, because only savings accounts are 100% secure. I've read that before substituting platform name and administrator. I believe the original text was actually written for the failure of a non-UK platform a couple of years ago. Personally I would just ignore this completely, and treat the editors of where ever you discovered this with a healthy dose of sceptism. The core principle is true though, that borrowers remain on the hook for repayment and aren't magically released from the debt. How successfully the borrowers are chased for repayment depends largely on the administrator, but most would agree it would hard to be a softer touch than FS appear to have been.... I definitely agree that it's a very bold statement to say "it's highly unlikely lenders will lose a lot of their money lent via FundingSecure as a result of its closure", especially at this very early stage.
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Post by defaultinator5000 on Oct 24, 2019 22:19:52 GMT
I read an interesting article just now. The Big Question: will lenders lose their money lent through FundingSecure? Of course, the failure of FundingSecure will have no bearing on the businesses that borrowed money via its platform, which still owe the lenders. Hence, it's crucial to note that it's highly unlikely lenders will lose a lot of their money lent via FundingSecure as a result of its closure – so please relax and take a deep breath. Indeed, many regulated peer-to-peer lending platforms have closed over the past five years. Although most were not substantial as FundingSecure, most of them have still ensured that lenders receive all or most of the money and interest that was owed to them. Depending on the quality of the underlying loans, the value of assets used as security for loans, and CGRL's ability to recover bad debts, some FundingSecure investors might lose a variable proportion of the money and interest due to them as a result of borrowers becoming unable to pay. But this is always the case in peer-to-peer lending, even for active, thriving P2P lending businesses. Then again, this risk applies to all manner of investing, because only savings accounts are 100% secure. I will not comment on whether the investors stand to lose a lot or just a little. However, I will make a bold claim that they will get more money back than if FS had continued its operations. Why? Because FS was drowning in unredeemed loans and simply gave up on recovering a large portion of the loan book, resorting to writing meaningless and often false updates once every few months to give investors false impression that they are still doing something. If they allowed themselves to get into a position where multiple 6-month loans were more than three years overdue, what makes anyone think they wouldn't just continue the can kicking infinitely and have a fourth, fifth, tenth anniversary of the "borrower is seeking refinance"? Money stuck in an eternal zombie loan one cannot liquidate is as good as the money flushed down the toilet. With the administrators on the job, at least the securities will be eventually liquidated (in those loans where FS actually bothered to register a charge) and the investors will get some percentage of their capital back.
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trium
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Post by trium on Oct 25, 2019 1:31:18 GMT
Somewhat unfashionably, I'm a little concerned about the effect all this might have on certain borrowers, specifically those developers who have not yet drawn down the full facility agreed with FS. Those borrowers my well be placed in the very difficult position of not having the cash to finish a project and being unable to source the funds elsewhere (if they could have gone elsewhere they surely would have done so in the first place). This may well adversely affect repayment prospects on what might otherwise have been fairly solid loans
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petrichory
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Post by petrichory on Oct 25, 2019 2:56:27 GMT
Somewhat unfashionably, I'm a little concerned about the effect all this might have on certain borrowers, specifically those developers who have not yet drawn down the full facility agreed with FS. Those borrowers my well be placed in the very difficult position of not having the cash to finish a project and being unable to source the funds elsewhere (if they could have gone elsewhere they surely would have done so in the first place). This may well adversely affect repayment prospects on what might otherwise have been fairly solid loans That bloody Quarry loan comes to mind  The first tranche was deliberately not renewed and FS treated lenders like suckers by changing the terms with an unlimited extension and no threat of enforcement. By all accounts, the project is on schedule and - although unconventional - not as esoteric as an indoor ski arena built on industrial wasteland (the one that everyone had predicted to fail, remember?) What I am looking for from the Administrators is the following: 1) A full account of the administrators report for T**D***, which was promised several months ago
1.1) Confirmation that the RICS insurance is currently being pursued to cover the rest of 1st and the whole of the 2nd charge loans. 2) Confirmation of intent to continue the litigation on the Lytham St Annes and Art loans. 3) Confirmation that a valid and binding undertaking for the Greenwich insurance payout is in place with no diversion of funds to the borrower. 4) Confirmation that the discharge from bankruptcy for the Barnoldswick borrower, aka. devious Mr. Party Cucumber, is challenged due to fraud. 4.1) Confirmation that the second charge Barnoldswick loan is a legal fiction and that there are in fact two separate charges against the house and land.
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james21
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Post by james21 on Oct 25, 2019 7:07:27 GMT
Somewhat unfashionably, I'm a little concerned about the effect all this might have on certain borrowers, specifically those developers who have not yet drawn down the full facility agreed with FS. Those borrowers my well be placed in the very difficult position of not having the cash to finish a project and being unable to source the funds elsewhere (if they could have gone elsewhere they surely would have done so in the first place). This may well adversely affect repayment prospects on what might otherwise have been fairly solid loans That bloody Quarry loan comes to mind The first tranche was deliberately not renewed and FS treated lenders like suckers by changing the terms with an unlimited extension and no threat of enforcement. By all accounts, the project is on schedule and - although unconventional - not as esoteric as an indoor ski arena built on industrial wasteland (the one that everyone had predicted to fail, remember?) What I am looking for from the Administrators is the following: 1) A full account of the administrators report for TheDell, which was promised several months ago
1.1) Confirmation that the RICS insurance is currently being pursued to cover the rest of 1st and the whole of the 2nd charge loans. 2) Confirmation of intent to continue the litigation on the Lytham St Annes and Art loans. 3) Confirmation that a valid and binding undertaking for the Greenwich insurance payout is in place with no diversion of funds to the borrower. 4) Confirmation that the discharge from bankruptcy for the Barnoldswick borrower, aka. devious Mr. Party Cucumber, is challenged due to fraud. 4.1) Confirmation that the second charge Barnoldswick loan is a legal fiction and that there are in fact two separate charges against the house and land.2) Confirmation of intent to continue the litigation on the Lytham St Annes and Art loans. To comment on your point above; litigation will be hugely expensive for the art loans. Ultimate returns per investor over all their loans will depend on which loans each individual is in (I assume) and the money to pay for legal costs may well have to come from repayments of loans. Many folk not in the art loans would be unhappy to have administrators costs spent on this activity. I am in them a small way and would choose to accept a write off rather than part fund an expensive legal action
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