dead-money
Rocket to the Moon
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Post by dead-money on Apr 12, 2020 17:53:12 GMT
So the email from CEO Stuart Law on 31st March make mention of "Borrower Retention Accounts".
Can anyone enlighten as to which loans have these, how large they are and have they were working / will work going forwards?
Specifically, all my MLA loans are property development loans; for each tranche drawdown my understanding was that AC retained the interest due on that tranche up to the planned completion date and then paid it across to lenders each month. Was this not a correct understanding?
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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 Apr 12, 2020 18:05:15 GMT
So the email from CEO Stuart Law on 31st March make mention of "Borrower Retention Accounts".
Can anyone enlighten as to which loans have these, how large they are and have they were working / will work going forwards?
Specifically, all my MLA loans are property development loans; for each tranche drawdown my understanding was that AC retained the interest due on that tranche up to the planned completion date and then paid it across to lenders each month. Was this not a correct understanding?
Nearly all development loans have them and some other loans may have buffers to smooth out void periods. Should be referenced in CRs. Should work as they have before with monthly payments being made. For those with buffers AC will drawdown funds to cover interest if borrower doesn't. They have also indicated they may make advances to create buffers for loans in forbearance that don't have them but with the caveat that that will raise the LTV as the borrowed capital will increase. T&Cs plus recent vote give them discretion to restructure in this way. Yes you are correct nearly all development loans retain the interest for each drawdown to cover the interest until the end of the term (and also AC monitoring fees). Obviously if a loan has been extended it probably wont have a retention fund so the interest will be either rolled up or paid monthly by the borrower. There are number of recent extensions where the borrower has not been able to cover interest. The retentions is one of the reasons why income for lenders, access accounts and AC will continue to flow at a reasonable level.
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dead-money
Rocket to the Moon
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Post by dead-money on Apr 12, 2020 18:13:18 GMT
OK, thanks that's reassuring; someone on another thread stated my understanding was incorrect...
Having reread a few credit reports they don't specifically state interest is retained, nor can I see any indication on loan pages as to whether there is a 'borrower retention account' and how large the buffer on that might be.
Is this something AC is keeping opaque and just not making publicly available?
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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
Posts: 11,329
Likes: 11,549
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Post by ilmoro on Apr 12, 2020 19:21:54 GMT
OK, thanks that's reassuring; someone on another thread stated my understanding was incorrect...
Having reread a few credit reports they don't specifically state interest is retained, nor can I see any indication on loan pages as to whether there is a 'borrower retention account' and how large the buffer on that might be.
Is this something AC is keeping opaque and just not making publicly available?
Its fairly obvious for the development loans, particularly the more recent ones with the new style CR with all the costs outlined on the usually the second page where it appears just under the box with the all the fees in. Non-development loans its usually somewhere in the CR, but I cant think of any examples of the top of my head and they are relatively rare. I think the terminology is slightly odd - never heard it called a borrower retention account so I doubt that appears anywhere, retained interest or buffer is more usually. Its not something that can be seen with a quick glance at a loan page. EDIT Ive just looked at the other thread and I think the confusion is that you have said the capital required to fund all the tranches is held by AC. That isn't the case, the funds for each tranche (including the interest cover) have to be funded fresh at each drawdown, its not ringfenced when the loan first starts except in a very few cases where the full amount is advanced on day one but only actually released to the borrower in phases. Thus is there is no cash available in the asset accounts (generally the source) or other sources, then the tranche wouldn't be available. That's the reason AC are not releasing all inflows from the access accounts to fund withdrawals as they know they need some to fund future drawdowns on development loans.
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