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Post by chris on Sept 10, 2015 8:22:44 GMT
It would be nice if the MLIA "On repayment" options could include another option to direct proceeds from sales due to set targets to the cash account. Setting it to withdraw payments and interest doesn't stop it topping up a target when a sell on another is achieved. On the to do list.
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Post by Butch Cassidy on Sept 10, 2015 9:12:32 GMT
I'm reviewing this with my fellow directors today. 0.01% discounts are a bit over the top and just allow sellers to circumvent the allocation algorithms by trying to out do other lenders by the tiniest of fractions. This can also mean bypassing the underwriters and QAA when they're trying to sell down a loan without actually having to offer anything beyond the tiniest of discounts. 1% was chosen to make sure that lenders offering a discount have to overcome that hurdle to do so, rather than just play with bypassing the algorithms as a matter of routine. We're thinking of allowing 0.5% and possibly even 0.25% but no promises on that yet. See your point on discounting beyond 50%, will discuss that as well and most likely will change it.
1% represents a whole months interest on many loans & is far too much to give away on a non impaired loan, 0.1 allows lenders flexibility & liquidity options but 0.25% would be the maximum graduation that was fair. As for sellers being wrong to want to circumvent the algorithm, as a seller I would suggest it is probably the algorithm/system that is wrong not the lender/customer!
Anything over 20% discount is very unlikely to be useful except in extreme or mistaken circumstances
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niceguy37
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Post by niceguy37 on Sept 10, 2015 9:33:17 GMT
I'm reviewing this with my fellow directors today. 0.01% discounts are a bit over the top and just allow sellers to circumvent the allocation algorithms by trying to out do other lenders by the tiniest of fractions. This can also mean bypassing the underwriters and QAA when they're trying to sell down a loan without actually having to offer anything beyond the tiniest of discounts. 1% was chosen to make sure that lenders offering a discount have to overcome that hurdle to do so, rather than just play with bypassing the algorithms as a matter of routine. We're thinking of allowing 0.5% and possibly even 0.25% but no promises on that yet. See your point on discounting beyond 50%, will discuss that as well and most likely will change it.
1% represents a whole months interest on many loans & is far too much to give away on a non impaired loan, 0.1 allows lenders flexibility & liquidity options but 0.25% would be the maximum graduation that was fair. As for sellers being wrong to want to circumvent the algorithm, as a seller I would suggest it is probably the algorithm/system that is wrong not the lender/customer!
Anything over 20% discount is very unlikely to be useful except in extreme or mistaken circumstances
I vote for allowing a small discount of 0.25%. If the loan is not severely impaired you shouldn't need to offer a large discount to shift it. I think allow the discounts in 0.25% increments, and let the market decide.
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Post by chris on Sept 10, 2015 9:52:27 GMT
I'm reviewing this with my fellow directors today. 0.01% discounts are a bit over the top and just allow sellers to circumvent the allocation algorithms by trying to out do other lenders by the tiniest of fractions. This can also mean bypassing the underwriters and QAA when they're trying to sell down a loan without actually having to offer anything beyond the tiniest of discounts. 1% was chosen to make sure that lenders offering a discount have to overcome that hurdle to do so, rather than just play with bypassing the algorithms as a matter of routine. We're thinking of allowing 0.5% and possibly even 0.25% but no promises on that yet. See your point on discounting beyond 50%, will discuss that as well and most likely will change it.
1% represents a whole months interest on many loans & is far too much to give away on a non impaired loan, 0.1 allows lenders flexibility & liquidity options but 0.25% would be the maximum graduation that was fair. As for sellers being wrong to want to circumvent the algorithm, as a seller I would suggest it is probably the algorithm/system that is wrong not the lender/customer!
Anything over 20% discount is very unlikely to be useful except in extreme or mistaken circumstances
The algorithm is in place to protect small lenders from being dominated by those with deep pockets. It's ensures small lenders are able to both buy and sell whilst still giving larger lenders a decent level of sell through. As far as I'm aware it's been well received and works well.
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Post by mrclondon on Sept 10, 2015 10:09:41 GMT
FWIW my take on the discount rates are that most of the impaired loans will need a discount substantially greater than 1% to be priced fairly for current risk. So the question is what level of discount should lenders be prepared to accept for emergency access to their funds* which have notionally been lent for terms of upto 5 years. At one time many building societies imposed a 90 day loss of interest on early withdrawals from term accounts, so the equivalent of only a month and a bit loss of interest at AC seems quite reasonable by comparison.
Posed like that, 1% doesn't seem an unreasonable minimum discount to minimise the risk of lenders attempting to game the system.
Edited to add footnote:
* And lets not forget that as I type only 8 non-impaired loans require a discount to achieve an immediate sale (5 x Midlands Trade, Merseyside Care, Expat L2L & Stockport L2L). For those that are interested I have small buy orders on 7 of the 8 at minimum discounts ranging from 1% (Merseyside) through 1.5%, 2% to 2.5%
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jonah
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Post by jonah on Sept 10, 2015 10:42:24 GMT
FWIW my take on the discount rates are that most of the impaired loans will need a discount substantially greater than 1% to be priced fairly for current risk. So the question is what level of discount should lenders be prepared to accept for emergency access to their funds* which have notionally been lent for terms of upto 5 years. At one time many building societies imposed a 90 day loss of interest on early withdrawals from term accounts, so the equivalent of only a month and a bit loss of interest at AC seems quite reasonable by comparison. Posed like that, 1% doesn't seem an unreasonable minimum discount to minimise the risk of lenders attempting to game the system. Edited to add footnote: * And lets not forget that as I type only 8 non-impaired loans require a discount to achieve an immediate sale (5 x Midlands Trade, Merseyside Care, Expat L2L & Stockport L2L). For those that are interested I have small buy orders on 7 of the 8 at minimum discounts ranging from 1% (Merseyside) through 1.5%, 2% to 2.5% Has anyone seen any discounted parts for sale on any loans? I know where I think it will show on a per loan basis but can't see if there is a way to get a more general overview.
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Post by mrclondon on Sept 10, 2015 10:50:08 GMT
Has anyone seen any discounted parts for sale on any loans? I know where I think it will show on a per loan basis but can't see if there is a way to get a more general overview. Until the monitoring event loans re-enter the aftermarket I doubt any will be visible. (I've not had any takers on my discount buy orders mentioned above). I have offered my very small holding in #68 at a 1% discount, so you may see it if you are quick when chris re-anables trading in that one.
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Post by pepperpot on Sept 10, 2015 11:00:11 GMT
FWIW my take on the discount rates are that most of the impaired loans will need a discount substantially greater than 1% to be priced fairly for current risk. So the question is what level of discount should lenders be prepared to accept for emergency access to their funds* which have notionally been lent for terms of upto 5 years. At one time many building societies imposed a 90 day loss of interest on early withdrawals from term accounts, so the equivalent of only a month and a bit loss of interest at AC seems quite reasonable by comparison. Posed like that, 1% doesn't seem an unreasonable minimum discount to minimise the risk of lenders attempting to game the system. Edited to add footnote: * And lets not forget that as I type only 8 non-impaired loans require a discount to achieve an immediate sale (5 x Midlands Trade, Merseyside Care, Expat L2L & Stockport L2L). For those that are interested I have small buy orders on 7 of the 8 at minimum discounts ranging from 1% (Merseyside) through 1.5%, 2% to 2.5% The £20 I've had for sale in Midlands trade t3 for 6 months is nearly gone since QAA went live. Snap on Merseyside, I guess we'll have competition also now that you've outed that info, might need to up the amount in an SS style game. 
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Sept 10, 2015 11:12:01 GMT
The £20 I've had for sale in Midlands trade t3 for 6 moths is nearly gone since QAA went live. Where do you find out the sterling to moth exchange rate? If I leave a window open, curtains open & a light on, I can collect quite a lot of moths. At a current rate of 1 moth:£3.33 this sounds like a potentially lucrative opportunity. 
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pikestaff
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Post by pikestaff on Sept 10, 2015 11:20:50 GMT
chris. I'm very happy to see loan discounting return, but it has gone from one extreme to another. Previously, we had discounting to 2 decimal places, now it's 0.5% steps and nothing below 1%. Previously, discounting had 3 purposes. 1. Allow lenders to get to the head of the queue with a tiny discount of 0.01%. 2. Allow underwriters to free up funds and allow lenders to get a better deal for less short-term liquidity. 3. Allow distressed loans to be sold at a sizeable discount, although this only happened on loan #70. (11% discount offered IIRC) Not sure if lenders want scenario 1. However, can we please have discounting of 0.1% steps up to 2%. This would satisfy scenario 2. Also, do we really want discounting to -99.5%. I'm worried a new investor may read this the wrong way round with a double negative and think it's a 0.5% discount. I think a maximum of 50% discount should cover all situations, remember it is asset backed lending. I'm reviewing this with my fellow directors today. 0.01% discounts are a bit over the top and just allow sellers to circumvent the allocation algorithms by trying to out do other lenders by the tiniest of fractions. This can also mean bypassing the underwriters and QAA when they're trying to sell down a loan without actually having to offer anything beyond the tiniest of discounts. 1% was chosen to make sure that lenders offering a discount have to overcome that hurdle to do so, rather than just play with bypassing the algorithms as a matter of routine. We're thinking of allowing 0.5% and possibly even 0.25% but no promises on that yet. See your point on discounting beyond 50%, will discuss that as well and most likely will change it. My personal view is that discounting in 1% increments is fine and I'd not go smaller than 0.5% because of the gaming issues. If it becomes possible to sell seriously distressed loans like the plumber (especially after a partial recovery) you will need to allow discounting beyond 50%.
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Post by pepperpot on Sept 10, 2015 11:26:04 GMT
The £20 I've had for sale in Midlands trade t3 for 6 moths is nearly gone since QAA went live. Where do you find out the sterling to moth exchange rate? If I leave a window open, curtains open & a light on, I can collect quite a lot of moths. At a current rate of 1 moth:£3.33 this sounds like a potentially lucrative opportunity. Oh, picking on a typo now are we... that's rich coming from MR GAA!!! The price has just gone up for you, 12 moths now. Anyone else can still have it for the initial asking price of 6. 
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Post by chris on Sept 10, 2015 11:37:43 GMT
We've discussed the discounts and it's been decided that the current options will remain. Discounts aren't provided so that lenders can idly jump the queue or circumvent the balancing / prioritisation algorithms that have been put in place to keep the market balanced for the benefit of all lenders.
A 1% discount, which as pointed out represents something in the region of 1 month of interest on average, is about right for someone looking for a speedy exit from an otherwise good loan. It's a hurdle but not an overly onerous one which is why we chose that level in the first place. Distressed loans have the option for higher discounts being offered.
It should also be remembered that we don't charge lenders any fees for exiting a loan, such as a sale fee or even a fee based on breaching the amount of time you'd agreed to lend the funds. Such fees can greatly affect the cost to lenders.
We'll keep this under review but for now the existing figures will remain in place.
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Post by Butch Cassidy on Sept 10, 2015 12:24:21 GMT
FWIW my take on the discount rates are that most of the impaired loans will need a discount substantially greater than 1% to be priced fairly for current risk. So the question is what level of discount should lenders be prepared to accept for emergency access to their funds* which have notionally been lent for terms of upto 5 years. At one time many building societies imposed a 90 day loss of interest on early withdrawals from term accounts, so the equivalent of only a month and a bit loss of interest at AC seems quite reasonable by comparison. Posed like that, 1% doesn't seem an unreasonable minimum discount to minimise the risk of lenders attempting to game the system. Edited to add footnote: * And lets not forget that as I type only 8 non-impaired loans require a discount to achieve an immediate sale (5 x Midlands Trade, Merseyside Care, Expat L2L & Stockport L2L). For those that are interested I have small buy orders on 7 of the 8 at minimum discounts ranging from 1% (Merseyside) through 1.5%, 2% to 2.5% The comparison with BS term accounts is spurious, as when entering the original term lenders knew that the withdrawal penalty existed & were happy to accept it, so only committed long term funds. AC loans although for a set term were also tradeable instruments, that given the constraints of supply/demand & credit event risk, investors were able to trade in & out of at any time without penalty. Currently demand outstrips supply so exiting non impaired loans isn't a problem on the whole, however should that situation reverse small discounts would become an important incentive.
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Post by Butch Cassidy on Sept 10, 2015 12:40:36 GMT
We've discussed the discounts and it's been decided that the current options will remain. Discounts aren't provided so that lenders can idly jump the queue or circumvent the balancing / prioritisation algorithms that have been put in place to keep the market balanced for the benefit of all lenders. A 1% discount, which as pointed out represents something in the region of 1 month of interest on average, is about right for someone looking for a speedy exit from an otherwise good loan. It's a hurdle but not an overly onerous one which is why we chose that level in the first place. Distressed loans have the option for higher discounts being offered. It should also be remembered that we don't charge lenders any fees for exiting a loan, such as a sale fee or even a fee based on breaching the amount of time you'd agreed to lend the funds. Such fees can greatly affect the cost to lenders. We'll keep this under review but for now the existing figures will remain in place. In the scenario of a loan that has a proposed 12 month interest buffer but that is miscalculated by AC (& only stands at 3 months), then loses it's tenant but the security still offers good cover, is suspended for a prolonged period only to be released again after the borrower continues to service the payments but now lenders find that what was a previously liquid loan has stagnated, small discounts maybe the suitable answer to enable an exit. Lenders are effectively being charged at least 1%for AC decision making (with the exception of losing the tenant) which seems rather unfair. andrewholgate?
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oldgrumpy
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Post by oldgrumpy on Sept 10, 2015 12:40:57 GMT
"...Where do you find out the sterling to moth exchange rate?..."
I remember Sterling Moth. He uthed to rathe motor carth when I wath a kid! 
(I'll get me coat...)
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