coogaruk
Hello everyone! Anyone remember me?
Posts: 702
Likes: 463
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Post by coogaruk on Jun 9, 2020 11:08:45 GMT
Update:
It looks as if I've now probably 'stumbled' into wind-down mode. With no recent activity at my minimum acceptable rates I've decided that my money would be better off (and safer!) in Premium Bonds than in the RS Holding Account, so while the present situation persists I will regularly (not sure at what intervals yet) draw down my balance.
I've never undertaken a RYI and have no intention of doing so yet (I hear there's a long queue) so hopefully my strategy will provide RS with a bit of much-needed cash-flow during the current crisis against those who have decided to just cut and run.
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Post by Deleted on Jun 9, 2020 13:11:29 GMT
Surely your approach doesn't help cashflow as you're still withdrawing repayments. It just means the back end of the queue is a little bit shorter, but there's no effect on those already in the queue?
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Post by shanghaiscouse on Jun 10, 2020 8:50:16 GMT
Update:
It looks as if I've now probably 'stumbled' into wind-down mode. With no recent activity at my minimum acceptable rates I've decided that my money would be better off (and safer!) in Premium Bonds than in the RS Holding Account, so while the present situation persists I will regularly (not sure at what intervals yet) draw down my balance.
I've never undertaken a RYI and have no intention of doing so yet (I hear there's a long queue) so hopefully my strategy will provide RS with a bit of much-needed cash-flow during the current crisis against those who have decided to just cut and run.
Premium Bonds / National Savings is wise, the direct access pays 0.9% but is 100% secure, and capital security is the name of the game at the moment. Just reading the Martin Lewis email today and he expects hundreds of thousands of redundancies in August when the furlough expires. The economy can still crater further and public finances will be in ruins for a decade to come.
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benaj
Member of DD Central
Posts: 4,832
Likes: 1,586
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Post by benaj on Jun 10, 2020 9:51:50 GMT
I like RS, I still top up regularly and place orders. Probably the only platform I am willing to do regular deposits.
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beagle
Investor in ratesetter, funding circle, lendy (lesson learnt) and AC
Posts: 670
Likes: 322
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Post by beagle on Jun 10, 2020 10:09:18 GMT
same here, i have had some money back. i was worried but they seem to remain composed. what people fail to see is that ratesetter is the platform not the loanbook and so if they went bust it doesn't mean my money is lost.
i will reinvest subject to them sorting some liquidity.
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Post by freefalljunkie on Jun 10, 2020 10:38:02 GMT
. what people fail to see is that ratesetter is the platform not the loanbook and so if they went bust it doesn't mean my money is lost. How do you figure that out? Ratesetter going bust would be a nightmare. You would then be dealing with an administrator, and if what has happened with other platforms is anything to go by it would be a very long and painful process to recover any of your money. Very hard to say how much of a risk this really is though - Ratesetter has never made a profit, and with little new investment in the current climate and lots of withdrawals I'd have thought their revenue can only be falling significantly. And the longer the interest haircut goes on, and the longer investors have to wait for RYIs, the bigger the reputational damage for their business, which makes it harder still to attract new investment. Hopefully things will be looking brighter in a few months IF they can weather the Covid storm.
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johnt
Investing in Ratesetter, Zopa and Assetz Capital since 2013
Posts: 127
Likes: 71
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Post by johnt on Jun 10, 2020 10:59:42 GMT
What's the reason behind RS not accepting new investments? Seems madness to me doing that.
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beagle
Investor in ratesetter, funding circle, lendy (lesson learnt) and AC
Posts: 670
Likes: 322
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Post by beagle on Jun 10, 2020 11:09:29 GMT
What's the reason behind RS not accepting new investments? Seems madness to me doing that. maybe they cant? perhaps the FCA has said no and sort yourself out
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beagle
Investor in ratesetter, funding circle, lendy (lesson learnt) and AC
Posts: 670
Likes: 322
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Post by beagle on Jun 10, 2020 11:11:10 GMT
. what people fail to see is that ratesetter is the platform not the loanbook and so if they went bust it doesn't mean my money is lost. How do you figure that out? Ratesetter going bust would be a nightmare. You would then be dealing with an administrator, and if what has happened with other platforms is anything to go by it would be a very long and painful process to recover any of your money. Very hard to say how much of a risk this really is though - Ratesetter has never made a profit, and with little new investment in the current climate and lots of withdrawals I'd have thought their revenue can only be falling significantly. And the longer the interest haircut goes on, and the longer investors have to wait for RYIs, the bigger the reputational damage for their business, which makes it harder still to attract new investment. Hopefully things will be looking brighter in a few months IF they can weather the Covid storm. it would be but my loan is with a borrower and it is on them i depend. i would argue they are weathering the storm otherwise they should stop all interest and protect capital only
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Post by shanghaiscouse on Jun 10, 2020 11:18:01 GMT
This is an interesting question. In Funding Circle as a comparison, when a debt defaults its legal status changes, its ownership is transferred automatically from the lender to a trust and the lender becomes a trustee of the trust. FC also differ in that it did not have a Provision Fund, so all the interest was paid to the lenders, but all the individual bad debts also landed on the specific lenders (not on the entire group of lenders as in Ratesetter).
In Ratesetter, clause 10 says that if a borrower does not make a payment then the Provision Fund will pay it to the lender (if enough funds in the fund) and the legal ownership of the unpaid amounts will transfer from the lender to the Provision Fund, and the PF will then try to get a recovery for its own account. The PF can then be boosted through declaring a stablisation period (what we have now) by cutting interest and ultimately capital repayments.
However, the PF is only topped up when the borrower makes good on the default, it isn't funded by RS itself.
In an 'unbufferred' system like FC there is no delay between a loan default and the impact on the specific lender. I have over £50k of individual loan defaults for instance, set agasint around £60k of interest and £6 of fees (so it was not really worth all the hassle). It looks bad.
However, assuming the same underwriting quality (not true as RS can only be better, cannot be worse than FC) if around 15% of loans default and recovery rate is only 10% of defaults, then you can expect 13.5% losses. At the moment there are £800m of loans under management and cash of £6m in the fund. So to me it looks seriously underfunded and it is just a matter of time until the bad debts wash through. On the other hand, my mind has probably been poisoned by my experience at FC where I have a lot more detailed insight into my loan book.
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ceejay
Posts: 970
Likes: 1,149
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Post by ceejay on Jun 10, 2020 11:21:54 GMT
How do you figure that out? Ratesetter going bust would be a nightmare. You would then be dealing with an administrator, and if what has happened with other platforms is anything to go by it would be a very long and painful process to recover any of your money. Very hard to say how much of a risk this really is though - Ratesetter has never made a profit, and with little new investment in the current climate and lots of withdrawals I'd have thought their revenue can only be falling significantly. And the longer the interest haircut goes on, and the longer investors have to wait for RYIs, the bigger the reputational damage for their business, which makes it harder still to attract new investment. Hopefully things will be looking brighter in a few months IF they can weather the Covid storm. it would be but my loan is with a borrower and it is on them i depend. i would argue they are weathering the storm otherwise they should stop all interest and protect capital only Your loan may (technically) be with a borrower but without an efficiently operating intermediary you are precisely nowhere. I was unfortunate enough to have some investment through COL, and after over two years of administration none of us has seen so much as a single penny returned. And that was with a far simpler platform with a relatively tiny number of borrowers and investors.
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Post by jochietoch on Jun 10, 2020 11:29:16 GMT
I think there are a number of risks to lenders in the event of platform failure: - Breach of ringfencing. Even if you think the loan is a contract between you and the borrower, if the platform got their documentation wrong this might be questionable. The administrators have a primary duty towards the platform's creditors, so if ringfencing is not waterproof it's not just their right but their duty to try and offload some of the losses onto lenders. This is a worst case, but versions of this have happened (was it Collateral or Lendy or both?).
- Lock-in to term. This is a near certainty as there are unlikely to be new investors in a bust platform to sell your loans to, and even if there were the administrators are likely under no obligation to run a costly secondary market.
- Borrower defaults. As shanghaiscouse pointed out, the legal status of the loan may change upon default; even if not, why would the administrators spend money to recover your defaulted loans? Knowing this, why would the less-scrupulous borrower keep paying? Is the provision fund solidly ringfenced?
- Fees. Administrators seem to have the right to increase fees, again this offloads some of the costs from (the company's) creditors onto (platform) lenders and borrowers.
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Post by gricehead on Jun 10, 2020 11:44:14 GMT
I've unwound my position to roughly 60/40 invested/holding and am now withdrawing some of the holding account funds to seek FSCS protection. Hopefully temporarily.
Of the remaining invested money, about 1/3 is access and 2/3 one year. I'm comfortable enough not to RYI, but will probably withdraw to FSCS as the one year investments return, which the vast majority are scheduled to do by the end of 2020.
I plan to leave some money fishing for higher rates in one year, but on a much smaller scale than before.
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Post by shanghaiscouse on Jun 10, 2020 11:45:35 GMT
In case of default the legal status does change and the loan is owned by RS. But RS is only liable up to the amount of the PF. If the PF is exhausted, RS is not responsible to fund it, they don't have a bottomless pool of capital, so funds will be taken from lenders as capital deductions in an intensification of the stabilisation period process. The assumption therefore has to be that if there are huge defaults then RS will make capital reductions to top up the PF, and keep the PF funded to pay out all the missed payments.
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Post by df on Jun 10, 2020 12:32:37 GMT
Update:
It looks as if I've now probably 'stumbled' into wind-down mode. With no recent activity at my minimum acceptable rates I've decided that my money would be better off (and safer!) in Premium Bonds than in the RS Holding Account, so while the present situation persists I will regularly (not sure at what intervals yet) draw down my balance.
I've never undertaken a RYI and have no intention of doing so yet (I hear there's a long queue) so hopefully my strategy will provide RS with a bit of much-needed cash-flow during the current crisis against those who have decided to just cut and run.
I withdraw my returns and unmatched orders every Monday. It became a routine for most platforms I’m in. Can’t be bothered joining queues. I remember queuing on Lendy - logging in every day to check the progress.....too stressful.
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