p2pfan
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Post by p2pfan on Nov 30, 2019 20:05:20 GMT
I lend to borrowers via P2P platforms with a mix of first and second charge securities on properties, mainly houses in the UK. Obviously I prefer the former.
I have spend quite a bit of time reading online about second charge, but every website only describes what it is, which I already know. What I'm keen to know is how realisable are second charges on properties in practice when the borrower is not paying their debt.
I am fully aware every situation will be different and it depends on how the borrower behaves, the first charge holder etc., but was wondering if anybody had insights into how practical it is to get all/most of one's money by selling a property on which one has lent on second charge?
How reliant is one on the first charge holder in such situations?
Has anybody experience of situations where they were a second charge lender and the charge had to be realised to get their money back?
In general, how much less likely is one to get their money back by calling in a second charge versus a first charge on a house (in the UK)?
Thanks in advance.
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iRobot
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Post by iRobot on Nov 30, 2019 20:50:14 GMT
This would be an excellent opportunity for bridgecrowd to step in with an explanation of the processes and considerations of 2nd (or otherwise junior) chargee enforcement .v. the seniority of a first chargee, especially within the context of their assertions that 2nd charge loans are preferable to first charge loans. Appreciate that some of BC's thinking - and actions - around 2nd charge loans are strictly between themselves and lenders (and subject to NDA  ); but there must be some general principles and thinking that can be shared, surely. |
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michaelc
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Say No To T.D.S.
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Post by michaelc on Nov 30, 2019 20:54:15 GMT
Would a platform's opinion be impartial ?
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iRobot
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Post by iRobot on Nov 30, 2019 21:13:35 GMT
Would a platform's opinion be impartial ? Can an opinion ever truly be impartial?  A platform can speak from a position of knowledge and experience; eg: - these are the relevant laws
- this is how those laws are typically applied
- in our experience ...
- etc
I'd expect BC opinions on the relative strengths of junior .v. senior charges to be somewhat impartial, but even opinions can be backed up by the facts which helped form them.
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michaelc
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Post by michaelc on Nov 30, 2019 22:04:23 GMT
Would a platform's opinion be impartial ? Can an opinion ever truly be impartial? A platform can speak from a position of knowledge and experience; eg: - these are the relevant laws
- this is how those laws are typically applied
- in our experience ...
- etc
I'd expect BC opinions on the relative strengths of junior .v. senior charges to be somewhat impartial, but even opinions can be backed up by the facts which helped form them. Did you get the email from them in June 2018 which headlined "With the BridgeCrowd, 2nd charge loans are as safe as 1st charge loans!" ?  Knowing that how can you possibly believe they would give their honest opinion on the subject?
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Post by propman on Dec 2, 2019 15:48:00 GMT
Never had a second charge called, but got a long way down the line of registering one on a property loan refinancing I was negotiating.
Basically was told that either provider could initiate proceedings that would lead to an administrator being appointed. However an administrator authorised for the second charge would have a legal requirement to work for Both creditors.
In modelling, the second charge is much more susceptible to recovery and exposure is critically dependent on downsides run. So if 50% (of valuation) borrowing on first charge and another 20% on second. Clearly recovery (after costs and extra interest/fees) of 70% allows full recovery for both. 60% recovery would mean a 14% loss if there was a single loan with a first charge, but in this scenario the first charge holder would be paid in full and the second charge holder will incur a 50% loss. In addition, in reality the administrator is primarily concerned with recovering the money owed to their appointer. While they do have a duty of care to other creditors (and the shareholders), there is often a grey area where a lower recovery can be made faster (or with greater certainty) that will be favoured by the first charge holder but resisted by the second charge holder. The deal I was involved in got bogged down in assurances and governance of the appointment and direction / approval of administrators and their actions. Not sure what will have been agreed by a second charge holding P2P Co, but if the first charge holder is a large finance provider I would expect that they would not agree to sharing any benefit they may get. You might be in a better position if the same lender made both loans (ie a higher risk with a second charge or a lower rate loan with a first charge).
Hope that helps
- PM
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Greenwood2
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Post by Greenwood2 on Dec 2, 2019 17:06:25 GMT
I would be looking at the overall LTV, a second charge loan with an overall LTV of 50%, might well be better than a 1st charge loan with an LTV of 70%. always assuming you trust the valuation.
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); but there must be some general principles and thinking that can be shared, surely.
