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Post by Ace on May 11, 2020 22:58:26 GMT
How would you know? Anyway there have certainly been examples where the loan has drawndown and then MLA buys have been actioned subsequently. I see no reason to assume that the tranches don't operate in the same way, QAA funds, then MLA buys are actioned. It is kind of moot point anyway. Whether the QAA has to commit all of the funds and then instantly get some/all back or actually only commits some/no funds, the account still has to factor in a requirement to fund all new tranches into its operating cash levels. Funds will only be free to be withdrawn once they are not potentially required elsewhereSo what you are saying is that AC are using the AAs as a lender of last resort, they have to buy these no matter what and get stuck with these if nobody else wants them. This means other people get the pick of these loans so therefore can select the the less risky and AA holders are left with the rest. Partly. It's true that if there are no outstanding MLA bids then the AAs are forced to buy, but that's the point of the AAs and the reason that AC has run so smoothly until the liquidity crisis hit. I don't think it's true that they are left with the more risky loans though. From my experience of MLA lending, its usually the higher rate loans that are more difficult to get hold of because they're in higher demand than the lower rate ones. Until now there has been little point in buying the lower rate loans via the MLA. You might as well have bought those through the AAs where you had the benefit of a PF and high diversification. All assuming that higher rate was well correlated to higher risk. EDIT: crossed with above post.
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dead-money
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Post by dead-money on May 11, 2020 23:02:29 GMT
"All assuming that higher rate was well correlated to higher risk"
For the borrower it usually is, preversely for the lender it often isn't; higher risk now seems to mean AC increases the monitoring fee, reducing the interest rate offered to lenders below that of lower risk loans.
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SteveT
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Post by SteveT on May 12, 2020 6:48:43 GMT
How would you know? Anyway there have certainly been examples where the loan has drawndown and then MLA buys have been actioned subsequently. I see no reason to assume that the tranches don't operate in the same way, QAA funds, then MLA buys are actioned. It is kind of moot point anyway. Whether the QAA has to commit all of the funds and then instantly get some/all back or actually only commits some/no funds, the account still has to factor in a requirement to fund all new tranches into its operating cash levels. Funds will only be free to be withdrawn once they are not potentially required elsewhereSo what you are saying is that AC are using the AAs as a lender of last resort, they have to buy these no matter what and get stuck with these if nobody else wants them. This means other people get the pick of these loans so therefore can select the the less risky and AA holders are left with the rest. No, you have it backwards. The Access Accounts have (for the last 2-3 years) been AC's lender of "first resort", providing a cheaper source of new lending capital than the previous balance of underwriters / institutional funding. Aside from loans taken up by institutional lenders, AC typically have used the Access Accounts to fund all new loans / tranches, initially at least, before deciding how much to continue to hold within the AAs and how much to "release" for selling on to MLA lenders (freeing up AA capital to fund further new loans). As an MLA lender, I can only buy into a loan if units are made available to me by the Access Accounts (or else another MLA lender).
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alender
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Post by alender on May 12, 2020 7:47:38 GMT
So what you are saying is that AC are using the AAs as a lender of last resort, they have to buy these no matter what and get stuck with these if nobody else wants them. This means other people get the pick of these loans so therefore can select the the less risky and AA holders are left with the rest. No, you have it backwards. The Access Accounts have (for the last 2-3 years) been AC's lender of "first resort", providing a cheaper source of new lending capital than the previous balance of underwriters / institutional funding. Aside from loans taken up by institutional lenders, AC typically have used the Access Accounts to fund all new loans / tranches, initially at least, before deciding how much to continue to hold within the AAs and how much to "release" for selling on to MLA lenders (freeing up AA capital to fund further new loans). As an MLA lender, I can only buy into a loan if units are made available to me by the Access Accounts (or else another MLA lender). But that is not the case now, the AAs have been left holding all/almost all of these tranches preventing the AA lenders form withdrawing most of their repaid capital. It does not matter what happens in normal times as everyone has access to their funds and risks are much lower but nobody now wants to fund these tranches. Therefore the last and only place AC can get the funding is through the AAs forcing unwilling AA holders to use their funds, looks like the lender of last resort to me. By definition the lender of last resort is the last/only lender used for funding, if it was not the AAs who else is there? When a lender of last resort is used they are the only lender so therefore are the lender of first and last resort.
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mrsb
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Post by mrsb on May 12, 2020 8:31:07 GMT
No, you have it backwards. The Access Accounts have (for the last 2-3 years) been AC's lender of "first resort", providing a cheaper source of new lending capital than the previous balance of underwriters / institutional funding. Aside from loans taken up by institutional lenders, AC typically have used the Access Accounts to fund all new loans / tranches, initially at least, before deciding how much to continue to hold within the AAs and how much to "release" for selling on to MLA lenders (freeing up AA capital to fund further new loans). As an MLA lender, I can only buy into a loan if units are made available to me by the Access Accounts (or else another MLA lender). But that is not the case now, the AAs have been left holding all/almost all of these tranches preventing the AA lenders form withdrawing most of their repaid capital. It does not matter what happens in normal times as everyone has access to their funds and risks are much lower but nobody now wants to find these tranches. Therefore the last and only place AC can get the funding is through the AAs forcing unwilling AA holders to use their funds, looks like the lender of last resort to me. By definition the lender of last resort is the last/only lender used for funding, if it was not the AAs who else is there? When a lender of last resort is used they are the only lender so therefore are the lender of first and last resort. You're right of course - but 'rock and a hard place'. Whats the alternative (perhaps CBILS ??) - AC can't bail on the tranches as already discussed. If there's a God, then hopefully AC pushing CBILS funds to further tranches. Of course the eligibility for CBILS is tight, so basket case loans (tranches) will still draw-down from "us" if the borrower chooses. No doubt (I hope) - new loans (I know - there are none!) are being written with some kind of "pandemic" and "NMC" conditions in them, to allow refusal of further tranches - to be used where there's a clear case of good money after bad. AC really should comment factually on the underlying numbers. Saying things like "£85,000" and "75% of investors" and other vague comments intended to reassure - but transparently disingenuous - is not helpful.
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victors
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Post by victors on May 12, 2020 8:57:50 GMT
Anyone have any idea when the launch date might be?
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dead-money
Rocket to the Moon
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Post by dead-money on May 12, 2020 9:06:25 GMT
Not until after the 'Legacy' site is turned off, as they won't be writing code for that, only the 'Beta' site, and that needs more work still.
I'd be shocked if 'Legacy' does go offline tomorrow.
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iRobot
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Post by iRobot on May 12, 2020 9:37:22 GMT
But that is not the case now, the AAs have been left holding all/almost all of these tranches preventing the AA lenders form withdrawing most of their repaid capital. It does not matter what happens in normal times as everyone has access to their funds and risks are much lower but nobody now wants to find these tranches. Therefore the last and only place AC can get the funding is through the AAs forcing unwilling AA holders to use their funds, looks like the lender of last resort to me. By definition the lender of last resort is the last/only lender used for funding, if it was not the AAs who else is there? When a lender of last resort is used they are the only lender so therefore are the lender of first and last resort. You're right of course - but 'rock and a hard place'. Whats the alternative (perhaps CBILS ??) - AC can't bail on the tranches as already discussed. If there's a God, then hopefully AC pushing CBILS funds to further tranches. Of course the eligibility for CBILS is tight, so basket case loans (tranches) will still draw-down from "us" if the borrower chooses.
No doubt (I hope) - new loans (I know - there are none!) are being written with some kind of "pandemic" and "NMC" conditions in them, to allow refusal of further tranches - to be used where there's a clear case of good money after bad. AC really should comment factually on the underlying numbers. Saying things like "£85,000" and "75% of investors" and other vague comments intended to reassure - but transparently disingenuous - is not helpful. Not entirely sure that's the case. Dev loans on AC have a high degree of scrutiny - witness the periodic Survey / Credit reports uploaded to support each tranche. If progress wasn't made and the loan came back as 'a basket case' I'd expect (but don't know for certain) that further funding could be withheld until the situation was rectified. The bigger concern, for me, isn't the funding of future tranches, but the longer term impact of a curtailed economy on demand and pricing. There may be some developments (due to type and location) on the books which may no longer be considered profitable given current forecasts (which may or may not come to pass). The issue for AC / lenders (of all flavours) is that the borrower / developer may simply say, ' sod it - there's no longer any profit in this, I'm walking away'. No demands on filling further tranches, but a part-completed development is a not a good thing.
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ceejay
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Post by ceejay on May 12, 2020 10:11:47 GMT
No, you have it backwards. The Access Accounts have (for the last 2-3 years) been AC's lender of "first resort", providing a cheaper source of new lending capital than the previous balance of underwriters / institutional funding. Aside from loans taken up by institutional lenders, AC typically have used the Access Accounts to fund all new loans / tranches, initially at least, before deciding how much to continue to hold within the AAs and how much to "release" for selling on to MLA lenders (freeing up AA capital to fund further new loans). As an MLA lender, I can only buy into a loan if units are made available to me by the Access Accounts (or else another MLA lender). But that is not the case now, the AAs have been left holding all/almost all of these tranches preventing the AA lenders form withdrawing most of their repaid capital. It does not matter what happens in normal times as everyone has access to their funds and risks are much lower but nobody now wants to fund these tranches. Therefore the last and only place AC can get the funding is through the AAs forcing unwilling AA holders to use their funds, looks like the lender of last resort to me. By definition the lender of last resort is the last/only lender used for funding, if it was not the AAs who else is there? When a lender of last resort is used they are the only lender so therefore are the lender of first and last resort. Not so. Looked at the MLA lately? The initial rush of panic discounting has mostly disappeared - MLA lenders are still very much in business. Plus, we are told, AC have institutional investors also wanting to play. And, we are also told, CBILs are deployable for future tranches of existing loans. There is a clear exit route for the AAs and that is to run them down gradually: if that's done carefully and not precipitously then losses should be minimised. Which is where this thread comes in - when the secondary market opens up we'll all be able to take our own positions on what the outcome will be.
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rscal
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Post by rscal on May 12, 2020 10:15:06 GMT
Not until after the 'Legacy' site is turned off, as they won't be writing code for that, only the 'Beta' site, and that needs more work still.
I'd be shocked if 'Legacy' does go offline tomorrow.
"Come over on to the new platform. It's lovely"
"Hell No, We Won't Go!"
"So zat's the vay you vont it...
..vell don't say ve didn't vorn you!"
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alender
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Post by alender on May 12, 2020 10:16:10 GMT
You're right of course - but 'rock and a hard place'. Whats the alternative (perhaps CBILS ??) - AC can't bail on the tranches as already discussed. If there's a God, then hopefully AC pushing CBILS funds to further tranches. Of course the eligibility for CBILS is tight, so basket case loans (tranches) will still draw-down from "us" if the borrower chooses.
No doubt (I hope) - new loans (I know - there are none!) are being written with some kind of "pandemic" and "NMC" conditions in them, to allow refusal of further tranches - to be used where there's a clear case of good money after bad. AC really should comment factually on the underlying numbers. Saying things like "£85,000" and "75% of investors" and other vague comments intended to reassure - but transparently disingenuous - is not helpful. The bigger concern, for me, isn't the funding of future tranches, but the longer term impact of a curtailed economy on demand and pricing. There may be some developments (due to type and location) on the books which may no longer be considered profitable given current forecasts (which may or may not come to pass). The issue for AC / lenders (of all flavours) is that the borrower / developer may simply say, ' sod it - there's no longer any profit in this, I'm walking away'. No demands on filling further tranches, but a part-completed development is a not a good thing. The issue is there is no incentive for a borrower that is going down to cut their losses as these will be born by AC lenders.
As an example
If a borrower is in real trouble and there is not much chance of survival and he walks away now he may owe £100,000, after costs AC will get some of that back which would be split say 50/50 between the MLA and AAs. If he carries on he could take another 2 tranches of say £100,000 each, there is a small chance of a turn around and he gets out with a small profit, however the odds are he goes under so this time owing AC £300,000 where over £250,000 is owed to AA holders. He will probably decide to carry on in the hope he gets out OK as it makes no difference to him if he goes down owing £100,000 or £300,000.
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dead-money
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Post by dead-money on May 12, 2020 10:23:00 GMT
You're right of course - but 'rock and a hard place'. Whats the alternative (perhaps CBILS ??) - AC can't bail on the tranches as already discussed. If there's a God, then hopefully AC pushing CBILS funds to further tranches. Of course the eligibility for CBILS is tight, so basket case loans (tranches) will still draw-down from "us" if the borrower chooses.
No doubt (I hope) - new loans (I know - there are none!) are being written with some kind of "pandemic" and "NMC" conditions in them, to allow refusal of further tranches - to be used where there's a clear case of good money after bad. AC really should comment factually on the underlying numbers. Saying things like "£85,000" and "75% of investors" and other vague comments intended to reassure - but transparently disingenuous - is not helpful. Not entirely sure that's the case. Dev loans on AC have a high degree of scrutiny - witness the periodic Survey / Credit reports uploaded to support each tranche. If progress wasn't made and the loan came back as 'a basket case' I'd expect (but don't know for certain) that further funding could be withheld until the situation was rectified. The bigger concern, for me, isn't the funding of future tranches, but the longer term impact of a curtailed economy on demand and pricing. There may be some developments (due to type and location) on the books which may no longer be considered profitable given current forecasts (which may or may not come to pass). The issue for AC / lenders (of all flavours) is that the borrower / developer may simply say, ' sod it - there's no longer any profit in this, I'm walking away'. No demands on filling further tranches, but a part-completed development is a not a good thing.
Yes, Monitoring Surveyors have refused requested funding when it's not been used appropriately, all developments are 'open book' projects between the lender and the borrower.
I know one loan where the site was shutdown, the outcome was receivership and 18 months later still no resolution; in-complete plots need demolition and no buyer coming forth. In my view, Just emphasises that lending needs to be to experienced and established developers.
For profitability, as Stuart said in one of his communications, the borrower takes a haircut before lenders do, so it would be highly unusual for a completed development not to sell plots to cover the loan. The potential 'basket cases' are incomplete developments, which aren't weatherproof, with insufficient contingency funds and 'walking away' would mean personal bankruptcy for the borrower.
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alender
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Post by alender on May 12, 2020 10:32:07 GMT
But that is not the case now, the AAs have been left holding all/almost all of these tranches preventing the AA lenders form withdrawing most of their repaid capital. It does not matter what happens in normal times as everyone has access to their funds and risks are much lower but nobody now wants to fund these tranches. Therefore the last and only place AC can get the funding is through the AAs forcing unwilling AA holders to use their funds, looks like the lender of last resort to me. By definition the lender of last resort is the last/only lender used for funding, if it was not the AAs who else is there? When a lender of last resort is used they are the only lender so therefore are the lender of first and last resort. Not so. Looked at the MLA lately? The initial rush of panic discounting has mostly disappeared - MLA lenders are still very much in business. Plus, we are told, AC have institutional investors also wanting to play. And, we are also told, CBILs are deployable for future tranches of existing loans. There is a clear exit route for the AAs and that is to run them down gradually: if that's done carefully and not precipitously then losses should be minimised. Which is where this thread comes in - when the secondary market opens up we'll all be able to take our own positions on what the outcome will be. If this is the case please can you tell me how much money of these future tranches has been funded by MLA, institutional investors and how much by AAs since the lock down. My AA withdrawals are only a small drip most days as the capital repayments are being used for these future tranches. CBILs may get us out of a lot of the trouble but it is passing the risk to the tax payer.
If the AAs are run down gradually under the current pool system the larger investors lose the most as on every capital repayment and financing for tranches makes the AA accounts more toxic. However any lenders who can not get out via withdrawals faces potential loses.
The definable advantage to large investors when the SM in AAs starts is the change to Pro Rata from the Pool, who knows what the discounts will be
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agent69
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Post by agent69 on May 12, 2020 10:47:10 GMT
Yes, Monitoring Surveyors have refused requested funding when it's not been used appropriately, all developments are 'open book' projects between the lender and the borrower.
I know one loan where the site was shutdown, the outcome was receivership and 18 months later still no resolution; in-complete plots need demolition and no buyer coming forth. In my view, Just emphasises that lending needs to be to experienced and established developers.
For profitability, as Stuart said in one of his communications, the borrower takes a haircut before lenders do, so it would be highly unusual for a completed development not to sell plots to cover the loan. The potential 'basket cases' are incomplete developments, which aren't weatherproof, with insufficient contingency funds and 'walking away' would mean personal bankruptcy for the borrower.
If you want to see what can happen when you pull the plug on a partly completed development loan, look no further than DFL001 on Ly.
I use to pass by frequently when I was working in the area and the 3 of 4 houses that were nearly completed looked very nice. Fast forward best part of 3 years and the 3 or 4 partly completed houses still look very nice (rest of the plot not so).I've lost interest in this one as I am not involved, but I think it was about £6m given to the borrower, which is a lot more than the current value of the site.
The estimated valuation on day one of completed development tends to be pie in the sky in many cases, and things will only get worse with depressed property sales for the forseable future. The best you can home for is for a development to be completed and sell at a loss. The alternative is the plug gets pulled part way through. From my perspective there will never be any mileage in development loans unless the the amount borrowed is always less that the current value of the site.
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agent69
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Post by agent69 on May 12, 2020 10:51:49 GMT
But that is not the case now, the AAs have been left holding all/almost all of these tranches preventing the AA lenders form withdrawing most of their repaid capital. It does not matter what happens in normal times as everyone has access to their funds and risks are much lower but nobody now wants to fund these tranches. Therefore the last and only place AC can get the funding is through the AAs forcing unwilling AA holders to use their funds, looks like the lender of last resort to me. By definition the lender of last resort is the last/only lender used for funding, if it was not the AAs who else is there? When a lender of last resort is used they are the only lender so therefore are the lender of first and last resort. Not so. Looked at the MLA lately? The initial rush of panic discounting has mostly disappeared - MLA lenders are still very much in business. Plus, we are told, AC have institutional investors also wanting to play. And, we are also told, CBILs are deployable for future tranches of existing loans. There is a clear exit route for the AAs and that is to run them down gradually: if that's done carefully and not precipitously then losses should be minimised. Which is where this thread comes in - when the secondary market opens up we'll all be able to take our own positions on what the outcome will be. But is this because of increased platform confidence, or are loan parts getting delisted because people know they caan't sell them?
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