rocky1
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Post by rocky1 on Feb 21, 2021 12:52:43 GMT
i suppose mainly due to covid 19 reasons. quite a few loans now due and after short re terms are being extended for up to 12 months. ok you are still earning interest.[where have i heard the interest accruing business before] what confuses me is that if the borrower cannot complete now after the original term how are they going to manage extra platform/monitoring/interest and whatever other fees/costs that are involved for the 12 month extension. the underlying security is still the same..the borrowers debt is increasing so how/why is this the best option for lenders i can see the benefit for the platforms for another 12 months.what am i missing here that it is in every bodies best interest to re term/extend these loans until the weather gets a bit better.
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Post by Ace on Feb 21, 2021 15:55:40 GMT
There are definitely some loans where it's in everyone's interest to extend or re-term. Take a property development loan for instance. Many of these have been delayed by covid. If there is sufficient leeway in the GDLTV for the extra interest to be accommodated then it makes perfect sense to extend the term. When the loan completes: lenders get their capital back with extra interest, and the borrower gets to complete the development which allows him to make a profit albeit likely less than he originally intended.
The alternative would be to put the loan into default/administration. Often in this scenario the half completed development is sold for a knockdown/fire-sale price, and large administration costs, leaving lenders with a capital loss and the borrower with a loss and a failed business.
I've seen many loans successfully complete after being given an extension across many platforms. It's not always the best course of action, but it sometimes is. Deciding which is which is tricky bit. Good platforms get this right. Bad platforms get it wrong. Ridiculous terms on some scam platforms, like 3% monthly default penalty interest to be paid to the platform in priority to lender's having their capital returned, mean that nobody but the scam platform wins.
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rocky1
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Post by rocky1 on Feb 22, 2021 6:40:56 GMT
yes Ace it is the PDLs that concern me now as simple bridging loans are few and far between.the LTGDVs are based on many assumptions on these multi tranche/tiered loans. borrowers profit 15/20% or RICS valuations being 30/40% or more of what is achieved when/if completed. is there room still in it for the borrower after another 12 months.
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Post by Ace on Feb 22, 2021 10:57:52 GMT
yes Ace it is the PDLs that concern me now as simple bridging loans are few and far between.the LTGDVs are based on many assumptions on these multi tranche/tiered loans. borrowers profit 15/20% or RICS valuations being 30/40% or more of what is achieved when/if completed. is there room still in it for the borrower after another 12 months.My bold. Again, the answer is that it will depend on the platform in general and the loan in particular. Quality platforms will ensure that there is scope in the deal for a 12 month overrun on PDLs. Quality platforms do not generally suffer from gross overvaluations. Take one such quality property development loan specialist platform: CrowdProperty. Their average LTGDV up to the end of 2020 was 53.7%. The average including rolled up interest was 58.5%. Their average project length was 13 months. This implies that a 12 month extension would result in less than 5% extra LTGDV, which there is plenty of scope for (assuming the borrower doesn't already have a 40% LTGDV equity stake). I haven't seen any statistics regarding the eventual selling prices for their projects, but one can easily research some examples by checking selling prices on the land registry website. The few that I have checked have sold for slightly above the originally protected GDVs, showing that they don't suffer from gross overvaluations. Obviously there is a great deal of variation in those average figures that could easily hide the odd problem loan, but as an investor I'm happy to lose some cash on a few bad loans as long as I make a decent overall profit on a platform. CP must have completed over 100 loans and have not lost a penny of investor's capital or any due interest on any of them so far, even though many of them will have overrun (more than would have been expected if it were not for covid), which also shows that they are not suffering from the problems envisaged. I've used CP as an example because they are one of my favourites, but I expect that similar results would have been found if I had analysed Kuflink, CapitalRise, Proplend, SoMo, Landlordinvest, etc. I'm well diversified across all of these platforms and am making a very healthy return, as are the borrowers. I haven't suffered a single loss of capital or interest on any of them yet (caveat: I've not been with SoMo long enough to have any loans complete yet). I fully expect to suffer occasional losses eventually, but I expect this to be well within the scope of the profits I've already made. I'm expecting to make losses in PDLs on Lendy and MoneyThing, so I do understand that things can and do go wrong. I didn't have much cash in either as both platforms were still in an evaluation phase for me. Even if they turn out to both be total losses it will amount to less than 1% of my P2P portfolio, and less than 10% of my all time P2P profits, and I don't expect it to be anywhere near that bad. I think that diversification across quality platforms is the key to sustainable profits. As I said before, working out which are the quality platforms is the tricky bit. And I wouldn't recommend trusting some numpty on a forum, though it might be a starting point for some platform DD.
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Greenwood2
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Post by Greenwood2 on Feb 22, 2021 12:28:52 GMT
yes Ace it is the PDLs that concern me now as simple bridging loans are few and far between.the LTGDVs are based on many assumptions on these multi tranche/tiered loans. borrowers profit 15/20% or RICS valuations being 30/40% or more of what is achieved when/if completed. is there room still in it for the borrower after another 12 months.My bold. Again, the answer is that it will depend on the platform in general and the loan in particular. Quality platforms will ensure that there is scope in the deal for a 12 month overrun on PDLs. Quality platforms do not generally suffer from gross overvaluations. Take one such quality property development loan specialist platform: CrowdProperty. Their average LTGDV up to the end of 2020 was 53.7%. The average including rolled up interest was 58.5%. Their average project length was 13 months. This implies that a 12 month extension would result in less than 5% extra LTGDV, which there is plenty of scope for (assuming the borrower doesn't already have a 40% LTGDV equity stake). I haven't seen any statistics regarding the eventual selling prices for their projects, but one can easily research some examples by checking selling prices on the land registry website. The few that I have checked have sold for slightly above the originally protected GDVs, showing that they don't suffer from gross overvaluations. Obviously there is a great deal of variation in those average figures that could easily hide the odd problem loan, but as an investor I'm happy to lose some cash on a few bad loans as long as I make a decent overall profit on a platform. CP must have completed over 100 loans and have not lost a penny of investor's capital or any due interest on any of them so far, even though many of them will have overrun (more than would have been expected if it were not for covid), which also shows that they are not suffering from the problems envisaged. I've used CP as an example because they are one of my favourites, but I expect that similar results would have been found if I had analysed Kuflink, CapitalRise, Proplend, SoMo, Landlordinvest, etc. I'm well diversified across all of these platforms and am making a very healthy return, as are the borrowers. I haven't suffered a single loss of capital or interest on any of them yet (caveat: I've not been with SoMo long enough to have any loans complete yet). I fully expect to suffer occasional losses eventually, but I expect this to be well within the scope of the profits I've already made. I'm expecting to make losses in PDLs on Lendy and MoneyThing, so I do understand that things can and do go wrong. I didn't have much cash in either as both platforms were still in an evaluation phase for me. Even if they turn out to both be total losses it will amount to less than 1% of my P2P portfolio, and less than 10% of my all time P2P profits, and I don't expect it to be anywhere near that bad. I think that diversification across quality platforms is the key to sustainable profits. As I said before, working out which are the quality platforms is the tricky bit. And I wouldn't recommend trusting some numpty on a forum, though it might be a starting point for some platform DD. You seem to be talking just increased interest on the loan, but extending the development by 12 months is going to increase the costs of the development, it implies they are running behind and will have to keep trades on site longer and possibly delay and re-let subcontracts. Overall material costs might not increase much, but labour costs could double if a 12 month project turns out to be a 24 month project.
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Post by Ace on Feb 22, 2021 12:37:21 GMT
My bold. Again, the answer is that it will depend on the platform in general and the loan in particular. Quality platforms will ensure that there is scope in the deal for a 12 month overrun on PDLs. Quality platforms do not generally suffer from gross overvaluations. Take one such quality property development loan specialist platform: CrowdProperty. Their average LTGDV up to the end of 2020 was 53.7%. The average including rolled up interest was 58.5%. Their average project length was 13 months. This implies that a 12 month extension would result in less than 5% extra LTGDV, which there is plenty of scope for (assuming the borrower doesn't already have a 40% LTGDV equity stake). I haven't seen any statistics regarding the eventual selling prices for their projects, but one can easily research some examples by checking selling prices on the land registry website. The few that I have checked have sold for slightly above the originally protected GDVs, showing that they don't suffer from gross overvaluations. Obviously there is a great deal of variation in those average figures that could easily hide the odd problem loan, but as an investor I'm happy to lose some cash on a few bad loans as long as I make a decent overall profit on a platform. CP must have completed over 100 loans and have not lost a penny of investor's capital or any due interest on any of them so far, even though many of them will have overrun (more than would have been expected if it were not for covid), which also shows that they are not suffering from the problems envisaged. I've used CP as an example because they are one of my favourites, but I expect that similar results would have been found if I had analysed Kuflink, CapitalRise, Proplend, SoMo, Landlordinvest, etc. I'm well diversified across all of these platforms and am making a very healthy return, as are the borrowers. I haven't suffered a single loss of capital or interest on any of them yet (caveat: I've not been with SoMo long enough to have any loans complete yet). I fully expect to suffer occasional losses eventually, but I expect this to be well within the scope of the profits I've already made. I'm expecting to make losses in PDLs on Lendy and MoneyThing, so I do understand that things can and do go wrong. I didn't have much cash in either as both platforms were still in an evaluation phase for me. Even if they turn out to both be total losses it will amount to less than 1% of my P2P portfolio, and less than 10% of my all time P2P profits, and I don't expect it to be anywhere near that bad. I think that diversification across quality platforms is the key to sustainable profits. As I said before, working out which are the quality platforms is the tricky bit. And I wouldn't recommend trusting some numpty on a forum, though it might be a starting point for some platform DD. You seem to be talking just increased interest on the loan, but extending the development by 12 months is going to increase the costs of the development, it implies they are running behind and will have to keep trades on site longer and possibly delay and re-let subcontracts. Overall material costs might not increase much, but labour costs could double if a 12 month project turns out to be a 24 month project. Yes, all fair points. There's also a potential for property prices to fall a fair bit during a12 month delay. Most of the delays during Covid were due to fewer people being allowed on site, so these delays won't have caused major increases in costs. I'm not saying there's no risk, there definitely is, just as there is in all forms of investment. I'm just saying that IMO there's a decent risk adjusted reward to be had from quality platforms.
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keitha
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2024, hopefully the year I get out of P2P
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Post by keitha on Feb 22, 2021 22:21:32 GMT
For me looking at non property loans lets say Joanne's florist owes FC 20K.
With a payment holiday until April it is likely she will have funds in May etc to repay the loan from sales etc as she would before lockdown, if FC insisted on payments now it would have to come from savings or money to pay other expenses, or the money she has tucked away for stock. This would potentially lead to the business going under and a limited return, to investors.
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p2pfan
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Post by p2pfan on Feb 23, 2021 10:18:23 GMT
Neverending loan extensions are a very common fraud perpetrated by many P2P platforms to be able to brag about a 100% repayment track-record and also, in some cases, their claim that a good ratio of their borrowers pay "on time" - the "time" is constantly pushed into the future.
These platforms keep extending loans again and again and/or by very long periods of time, therefore they don't have to declare them as defaults.
These platforms cannily typically hide the huge ratio and number of loans that receive multiple or long extensions on their statistics pages, so it's not easy to determine whether the platform is on the ball or not (usually they're not; hence the highly selective nature of the data they present).
One of the reason I've pulled out of a few P2P platforms is their obsessive biases in the favour of miscreant borrowers and their lack of bona fide desire to get loans paid back on time. I'm not stating at all there shouldn't be leniency in extenuating circumstances, but when extensions of many months, or in some cases totalling years, have always been the norm then it shows that something is seriously wrong.
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dave4
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Cynical is a hobby not a lifestyle
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Post by dave4 on Feb 23, 2021 11:50:20 GMT
I believe in the months to come the "good" platforms should start to shine out from the "bad". The trick as lenders will be noticing and acting.
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ozboy
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Mine's a Large One! (Snigger, snigger .......)
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Post by ozboy on Feb 23, 2021 12:50:29 GMT
The problem dave4, is that no matter how "good" a platform is, they quickly change their colours when the going gets tough. Then, it's always "Platform First", funnily enough, with Lenders coming very last, and nursing massive losses, whilst the Platform waltzes off being rewarded with £££££££s for gross incompetence/fraud/lying/cheating/you name it. Until the idiot FCA understands P2P and decides to robustly clean it up, for it's an almighty cesspit, you have to be VERY brave to continue lending. Just my humble opinions of course.  |
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dave4
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Post by dave4 on Feb 23, 2021 13:07:21 GMT
ozboy you may indeed be correct, but i believe that if you are brave enough " lucky" there may well still places to invest. P2p. Banks / traditional lenders still turn down lenders, Only cherry picking the best in there opinion.Platforms do and will continue to always win, untill something changes. Defiantly wouldn't stake the farm.
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