tcuk
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Post by tcuk on Aug 23, 2020 17:09:36 GMT
I have about £17.5k in one access RYI from 19/3, about 5300 in the queue. And about £850 in an ISA access RYI, 16000+ in the queue..
Even the big one I suspect will never get to the front the way things are right now, so I was taking a look at my loan books today to try and better understand what my exposure is and when I might expect money back.. The results were a bit disappointing. For my ISA account I have only 7 loans, the largest of which is for nearly £600, an amortising consumer loan with 14 months still to run... and... looking at the loan details I see the following:
Has the Provision Fund made a repayment on behalf of the borrower? Yes
Has the borrower defaulted? Yes
Does RateSetter consider that the borrower will repay in full? Yes
As another kick in the teeth, the original contract date is 11/3/2020... So my loan book picked this up just before everything went tits up as it were... The "initial loan amount" is also the same as the "outstanding balance"
For my 17.5k everyday account, my largest loan is for nearly £1700 another amortising consumer loan (i.e. almost 10% of my investment). This loan was formed 8/6/2019 and has 22 months left to run. The details again say the "outstanding balance" is the same as "Your initial loan amount"
and again I see
Has the Provision Fund made a repayment on behalf of the borrower? Yes
Has the borrower defaulted? Yes
Does RateSetter consider that the borrower will repay in full? Yes
So questions...
1) Does the initial loan amount being the same as the outstanding balance imply the borrow has never made a repayment, or is this a quirk of the weird way that ratesetter creates new contracts each month from amortising loans?
2) Why, if the borrower has defaulted on the loan, does ratesetter consider that the borrower will repay in full? This makes no sense unless by borrower they actually mean "borrower or provision fund".
3) Given a large portion of my capital seems to be tied up in loans that have already defaulted... (although ratesetter still considers they will be paid in full..), what does this mean in terms of the provision fund? Is the way it works at the moment, that basically every payment missed by the borrower gets made by the provision fund? What will happen if the provision fund runs out, is it just tough luck to investors that happened to pick up large chunks of bad loans, but those lucky enough not to have them are ok??
I also have money in zopa which is winding down, and where there is no provision fund (or safeguard) for most of the loans, but I was aware there that defaults were factored into expected returns, and.. crucially, your investment is diversified so you never have more than £10 exposure to any individual loan... Obviously ratesetter have gone for a very different approach, with almost three quarters of one of my investments tied up in a single (bad) loan...
Kicking myself for not paying more attention sooner when the RYI rush started, I did consider it, but stupidly I (initially at least) was persuaded by Ratesetters assuring (at first) emails, and the fact that the provision fund was supposedly well above 100%.
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Post by davee39 on Aug 23, 2020 17:44:41 GMT
All RS loans come under one pool as far as the PF is concerned. If all your loans defaulted the pain would be spread equally across all borrowers.
If the PF continued to run dry the next step would be a further interest cut. This would be followed by a capital contribution from ALL borrowers,
with perhaps a 1% reduction in loan value across all holdings.
This ensures that lenders with bad loans still get paid out at the due time.
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up
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Post by up on Aug 23, 2020 18:17:01 GMT
1) Does the initial loan amount being the same as the outstanding balance imply the borrow has never made a repayment, or is this a quirk of the weird way that ratesetter creates new contracts each month from amortising loans? Note the contracts show initial/outstanding amounts for both "Your" (contract this loan part) and "Borrower" - so two pairs - and for the "quirk" of Access renewed contracts each month the Your Initial/Outstanding amounts are both the same - but I confirm from checking the Borrower initial/outstanding are as would be expected: outstanding reduces as term counts down where Amortising. FWIW I dont think the HasDefaulted/Will Repay are more than indicators - I have a 1Y loan that was Default:Yes from within a day or so of being formed (and it was full term so not a RYI recycle) - when queried how this could be RS said "due to the nature of the loan, this will display as such, however the borrower has not defaulted and for your peace of mind this is a secured loan"
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tcuk
Posts: 23
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Post by tcuk on Aug 23, 2020 18:33:08 GMT
FWIW I dont think the HasDefaulted/Will Repay are more than indicators - I have a 1Y loan that was Default:Yes from within a day or so of being formed (and it was full term so not a RYI recycle) - when queried how this could be RS said "due to the nature of the loan, this will display as such, however the borrower has not defaulted and for your peace of mind this is a secured loan" Thanks, so basically RS are saying we can't trust some of the information they display about the nature of our investments to be correct? Not exactly reassuring. Unfortunately neither of the loans I mentioned are secured, or at least Ratesetters website says they're not.. But it seems we can't trust that information to necessarily be correct.. So... 🤷
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up
Posts: 59
Likes: 62
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Post by up on Aug 23, 2020 18:51:42 GMT
FWIW I dont think the HasDefaulted/Will Repay are more than indicators - I have a 1Y loan that was Default:Yes from within a day or so of being formed (and it was full term so not a RYI recycle) - when queried how this could be RS said "due to the nature of the loan, this will display as such, however the borrower has not defaulted and for your peace of mind this is a secured loan" Thanks, so basically RS are saying we can't trust some of the information they display about the nature of our investments to be correct? Not exactly reassuring. Unfortunately neither of the loans I mentioned are secured, or at least Ratesetters website says they're not.. But it seems we can't trust that information to necessarily be correct.. So... 🤷 FWIW I think you can trust them - but accept that much of the system is an abstraction (Market/Borrower offers are not real - we dont see late payments - payment schedules are to some extent artificial). Have you checked to see Borrower Initial / Outstanding have reduced ? (should have mentioned those are in the "Your borrower's loan details" section of the contract view).
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Post by shanghaiscouse on Aug 24, 2020 11:42:27 GMT
I have about £17.5k in one access RYI from 19/3, about 5300 in the queue. And about £850 in an ISA access RYI, 16000+ in the queue.. Even the big one I suspect will never get to the front the way things are right now, so I was taking a look at my loan books today to try and better understand what my exposure is and when I might expect money back.. The results were a bit disappointing. For my ISA account I have only 7 loans, the largest of which is for nearly £600, an amortising consumer loan with 14 months still to run... and... looking at the loan details I see the following: Has the Provision Fund made a repayment on behalf of the borrower? Yes Has the borrower defaulted? Yes Does RateSetter consider that the borrower will repay in full? Yes As another kick in the teeth, the original contract date is 11/3/2020... So my loan book picked this up just before everything went tits up as it were... The "initial loan amount" is also the same as the "outstanding balance" For my 17.5k everyday account, my largest loan is for nearly £1700 another amortising consumer loan (i.e. almost 10% of my investment). This loan was formed 8/6/2019 and has 22 months left to run. The details again say the "outstanding balance" is the same as "Your initial loan amount" and again I see Has the Provision Fund made a repayment on behalf of the borrower? Yes Has the borrower defaulted? Yes Does RateSetter consider that the borrower will repay in full? Yes So questions... 1) Does the initial loan amount being the same as the outstanding balance imply the borrow has never made a repayment, or is this a quirk of the weird way that ratesetter creates new contracts each month from amortising loans? 2) Why, if the borrower has defaulted on the loan, does ratesetter consider that the borrower will repay in full? This makes no sense unless by borrower they actually mean "borrower or provision fund". 3) Given a large portion of my capital seems to be tied up in loans that have already defaulted... (although ratesetter still considers they will be paid in full..), what does this mean in terms of the provision fund? Is the way it works at the moment, that basically every payment missed by the borrower gets made by the provision fund? What will happen if the provision fund runs out, is it just tough luck to investors that happened to pick up large chunks of bad loans, but those lucky enough not to have them are ok?? I also have money in zopa which is winding down, and where there is no provision fund (or safeguard) for most of the loans, but I was aware there that defaults were factored into expected returns, and.. crucially, your investment is diversified so you never have more than £10 exposure to any individual loan... Obviously ratesetter have gone for a very different approach, with almost three quarters of one of my investments tied up in a single (bad) loan... Kicking myself for not paying more attention sooner when the RYI rush started, I did consider it, but stupidly I (initially at least) was persuaded by Ratesetters assuring (at first) emails, and the fact that the provision fund was supposedly well above 100%. You don't understand how the provision fund works. It doesn't matter you have all your investment in one loan. Once the PF has made a payment to you then ownership of the loan passes to the PF and you will receive all future payments from the PF. Only if the PF runs out of money will you be affected. The PF is funded by all investors equally. So the losses on "your" loan is now being covered by all other investors, not you.
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coogaruk
Hello everyone! Anyone remember me?
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Post by coogaruk on Aug 24, 2020 11:54:47 GMT
The PF is funded by all investors but not equally.
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aju
Member of DD Central
Posts: 3,500
Likes: 924
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Post by aju on Aug 24, 2020 16:02:30 GMT
I assume no one has as yet asked RS if this information is available if at all and as it was of interest to me too I've cobbled an email together and asked them if this info is available and how it shows if at all. I suspect they will just suggest that these type of things are covered by the PF in some way but we'll see what the response might be. (I'll post it if I think its useful but I won't hold my breath) Myself and Mrs aju have over 300+ Zopa loans that are similar to yours tcuk (mostly <£10) and are marked as covid affected but over there one can easily see this information from new fields they added recently to make it easier to identify and in the past as changed statuses and commented info. Many of these are in fact still covered by Zopa's Safeguard but many aren't too. |
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Greenwood2
Member of DD Central
Posts: 4,396
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Post by Greenwood2 on Aug 24, 2020 16:28:04 GMT
I have about £17.5k in one access RYI from 19/3, about 5300 in the queue. And about £850 in an ISA access RYI, 16000+ in the queue.. Even the big one I suspect will never get to the front the way things are right now, so I was taking a look at my loan books today to try and better understand what my exposure is and when I might expect money back.. The results were a bit disappointing. For my ISA account I have only 7 loans, the largest of which is for nearly £600, an amortising consumer loan with 14 months still to run... and... looking at the loan details I see the following: Has the Provision Fund made a repayment on behalf of the borrower? Yes Has the borrower defaulted? Yes Does RateSetter consider that the borrower will repay in full? Yes As another kick in the teeth, the original contract date is 11/3/2020... So my loan book picked this up just before everything went tits up as it were... The "initial loan amount" is also the same as the "outstanding balance" For my 17.5k everyday account, my largest loan is for nearly £1700 another amortising consumer loan (i.e. almost 10% of my investment). This loan was formed 8/6/2019 and has 22 months left to run. The details again say the "outstanding balance" is the same as "Your initial loan amount" and again I see Has the Provision Fund made a repayment on behalf of the borrower? Yes Has the borrower defaulted? Yes Does RateSetter consider that the borrower will repay in full? Yes So questions... 1) Does the initial loan amount being the same as the outstanding balance imply the borrow has never made a repayment, or is this a quirk of the weird way that ratesetter creates new contracts each month from amortising loans? 2) Why, if the borrower has defaulted on the loan, does ratesetter consider that the borrower will repay in full? This makes no sense unless by borrower they actually mean "borrower or provision fund". 3) Given a large portion of my capital seems to be tied up in loans that have already defaulted... (although ratesetter still considers they will be paid in full..), what does this mean in terms of the provision fund? Is the way it works at the moment, that basically every payment missed by the borrower gets made by the provision fund? What will happen if the provision fund runs out, is it just tough luck to investors that happened to pick up large chunks of bad loans, but those lucky enough not to have them are ok?? I also have money in zopa which is winding down, and where there is no provision fund (or safeguard) for most of the loans, but I was aware there that defaults were factored into expected returns, and.. crucially, your investment is diversified so you never have more than £10 exposure to any individual loan... Obviously ratesetter have gone for a very different approach, with almost three quarters of one of my investments tied up in a single (bad) loan... Kicking myself for not paying more attention sooner when the RYI rush started, I did consider it, but stupidly I (initially at least) was persuaded by Ratesetters assuring (at first) emails, and the fact that the provision fund was supposedly well above 100%. You don't understand how the provision fund works. It doesn't matter you have all your investment in one loan. Once the PF has made a payment to you then ownership of the loan passes to the PF and you will receive all future payments from the PF. Only if the PF runs out of money will you be affected. The PF is funded by all investors equally. So the losses on "your" loan is now being covered by all other investors, not you. I believe that if the PF runs out completely all lenders will receive pro rata payments from each payment received from any borrower, lenders individual loans would all be pooled.
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aju
Member of DD Central
Posts: 3,500
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Post by aju on Aug 24, 2020 16:36:31 GMT
You don't understand how the provision fund works. It doesn't matter you have all your investment in one loan. Once the PF has made a payment to you then ownership of the loan passes to the PF and you will receive all future payments from the PF. Only if the PF runs out of money will you be affected. The PF is funded by all investors equally. So the losses on "your" loan is now being covered by all other investors, not you. I believe that if the PF runs out completely all lenders will receive pro rata payments from each payment received from any borrower, lenders individual loans would all be pooled. That will be interesting I wonder if they actually have that code working yet (probably they have if its in the t&c's). 
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Greenwood2
Member of DD Central
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Post by Greenwood2 on Aug 25, 2020 6:40:14 GMT
I believe that if the PF runs out completely all lenders will receive pro rata payments from each payment received from any borrower, lenders individual loans would all be pooled. That will be interesting I wonder if they actually have that code working yet (probably they have if its in the t&c's). Don't worry I just re-read the T&Cs etc and it doesn't say that (may be that was before the change in terms to allow interest and capital haircuts) so I don't know how it will work fairly. At the end there could be surplus funds from the haircuts or insufficient to pay back whatever % you were hoping to get, depending on how many borrowers pay back how much. Interesting to see what RS say.
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tcuk
Posts: 23
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Post by tcuk on Aug 25, 2020 7:13:32 GMT
Myself and Mrs aju have over 300+ Zopa loans that are similar to yours tcuk (mostly <£10) and are marked as covid affected but over there one can easily see this information from new fields they added recently to make it easier to identify and in the past as changed statuses and commented info. Many of these are in fact still covered by Zopa's Safeguard but many aren't too. I looked at the csv file yesterday and it's roughly 5% of my portfolio that is Covid affected, some are still covered by safeguard (have been in Zopa since 2011) but most aren't now. Is there any way to do an equivalent spreadsheet download of ones ratesetter loan book? It would make analysing my position there much easier
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Post by madmalcs on Aug 25, 2020 12:29:28 GMT
RS told me recently that loans which indicate a Provision Fund payment has been made can just mean the borrower once made a late repayment and even if they are completely up to date now, it will still indicate this. This indicator seems of limited use. Also, RS say that loans are shown as in default if they are 3 months or more in arrears.
In spite of knowing how the provision fund shares risk, I recently did some analysis on my own loan portfolio out of curiosity to obtain some indication of the overall rate of default and late payment. I covered all my amortising loan parcels up to £100 (about 1/3 of the volume and 80% of my total amortising loans). This indicated 20% of the sample were marked as having had a provision fund payment and 3.6% deemed in default. I then removed the outliers over £1,000 as none of those were marked in default or provision fund paid - this produced revised results of 4.8% in default and 29% marked with a provision fund payment (33% when I took a volume approach instead of value). I know this is incredibly rough but is suggests around 30% have been late at least once. The default rate of 4.8% is not necessarily that meaningful in itself but it seems a bit high and also this must presumably be reduced by any loans fully transferred to the provision fund. Any thoughts?
I also find it most intriguing that all three loans in default in my sample were marked as still expecting to be paid so it makes me wonder how RS base that decision, how that affects their loan stats and whether this could be manipulated.
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Post by Deleted on Aug 25, 2020 14:08:16 GMT
I think there are a lot of loans that RS know will default but haven't yet hit the PF. RS has no incentive to allow them to hit the PF as that could wipe it out entirely.
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aju
Member of DD Central
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Post by aju on Aug 26, 2020 13:43:29 GMT
I assume no one has as yet asked RS if this information is available if at all and as it was of interest to me too I've cobbled an email together and asked them if this info is available and how it shows if at all. I suspect they will just suggest that these type of things are covered by the PF in some way but we'll see what the response might be. (I'll post it if I think its useful but I won't hold my breath) <Irrelevant item Snipped> So I have had a response today from RS, see what you think... I asked if it was ok to post here and they added a further comment as follows. for the record I only agreed to redact the names. As I said see what you think!
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