dh1
Member of DD Central
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Post by dh1 on Aug 15, 2023 15:53:55 GMT
Your suggested priority order makes sense, Ace . Good thinking. Capital should always come first.
I think that Proplend is really a very low volume (in terms of loan throughput) platform; so it isn't so much behind the p2p curve as in one of its own and should perhaps be thought of as such.
I'm on my way out of it anyway as I'm no longer happy with the risk reward balance. Just my view, of course.
It does have a totally brilliant IFISA transfer in/out process; I wish everybody else came close to it!
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eeyore
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Post by eeyore on Aug 15, 2023 16:54:19 GMT
I wonder if it's time for Proplend to reconsider the priority repayment order. ........ The current priority order for lenders is: - Tranche A Capital
- Tranche A Interest and fees
- Tranche B Capital
- Tranche B Interest and fees
- Tranche C Capital
- Tranche C Interest and fees
A major problem with this is that, even though the Tranche LTV boundaries are well defined at the start they can change substantially if the default drags on for any length of time, as Tranche A Interest, penalty interest, and fees can push the Tranche B starting LTV boundary a lot higher than 50%. Would it not be better to prevent capital losses to as many lenders as possible before paying out profits? Either that or increase the differentials to better balance/reward the risk. So the priority order would be: - Tranche A Capital
- Tranche B Capital
- Tranche C Capital
- Tranche A Interest and fees
- Tranche B Interest and fees
- Tranche C Interest and fees
......... Ace - interesting points you raise for debate! I've always wondered how Proplend calculate the interest rates for the different tranches to allow for the increased risk for the tranches and how investors in Tranches B & C evaluate the higher rates against risk. I agree that's the current priority order but it's only applied at the point at which the loan is "wound up". It doesn't take into account the interest which has already been paid every month since the start of the loan until the borrower stopped paying the interest. Now if the loan had been like a CrowdProperty loan where interest is not paid until the loan is redeemed and bundled with the capital payment, then Tranche C lenders would likely lose everything - capital and interest. With the current arrangement at Proplend, it's not been a total wipeout for Tranche C (14%pa for nearly two years?) To allocate capital repayments to Tranche C & B before paying interest to Tranche A, penalises Tranche A which raises a few questions for me: - should interest be clawed back from Tranches C & B if there's a shortfall in outstanding interest for Tranche A? - there would need to be an increase in the interest rate paid to Tranche A and a corresponding decrease in the rates for B & C - after all, the higher the risk, the higher the interest rate. - Tranche A loans at Proplend are seen as one of the lower-risk P2P investments. Any increase in the apparent risk might have a negative market effect for Proplend.
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Post by Ace on Aug 15, 2023 17:00:11 GMT
I wonder if it's time for Proplend to reconsider the priority repayment order. ........ The current priority order for lenders is: - Tranche A Capital
- Tranche A Interest and fees
- Tranche B Capital
- Tranche B Interest and fees
- Tranche C Capital
- Tranche C Interest and fees
A major problem with this is that, even though the Tranche LTV boundaries are well defined at the start they can change substantially if the default drags on for any length of time, as Tranche A Interest, penalty interest, and fees can push the Tranche B starting LTV boundary a lot higher than 50%. Would it not be better to prevent capital losses to as many lenders as possible before paying out profits? Either that or increase the differentials to better balance/reward the risk. So the priority order would be: - Tranche A Capital
- Tranche B Capital
- Tranche C Capital
- Tranche A Interest and fees
- Tranche B Interest and fees
- Tranche C Interest and fees
......... Ace - interesting points you raise for debate! I've always wondered how Proplend calculate the interest rates for the different tranches to allow for the increased risk for the tranches and how investors in Tranches B & C evaluate the higher rates against risk. I agree that's the current priority order but it's only applied at the point at which the loan is "wound up". It doesn't take into account the interest which has already been paid every month since the start of the loan until the borrower stopped paying the interest. Now if the loan had been like a CrowdProperty loan where interest is not paid until the loan is redeemed and bundled with the capital payment, then Tranche C lenders would likely lose everything - capital and interest. With the current arrangement at Proplend, it's not been a total wipeout for Tranche C (14%pa for nearly two years?) To allocate capital repayments to Tranche C & B before paying interest to Tranche A, penalises Tranche A which raises a few questions for me: - should interest be clawed back from Tranches C & B if there's a shortfall in outstanding interest for Tranche A? - there would need to be an increase in the interest rate paid to Tranche A and a corresponding decrease in the rates for B & C - after all, the higher the risk, the higher the interest rate. - Tranche A loans at Proplend are seen as one of the lower-risk P2P investments. Any increase in the apparent risk might have a negative market effect for Proplend. Fair points. Perhaps the paid interest of higher risk tranches should be subtracted from their capital paybacks until lower risk tranches have received their interest. Effectively a clawback.
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eeyore
Member of DD Central
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Post by eeyore on Aug 15, 2023 17:08:49 GMT
Penalty interest and late redemption exit charge paid into my account in respect of my Tranche A loan in this investment today. Thank you and well done Proplend. Fingers crossed for others invested in Tranche B and C. For the sake of completeness: In addition to the payment on 3-Aug of £38.97/£1k for outstanding interest, TrancheA lenders appear to have been paid £60.02/£1k in penalty interest plus the £5 Late Redemption Exit Charge.
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jonno
Member of DD Central
nil satis nisi optimum
Posts: 2,744
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Post by jonno on Aug 15, 2023 17:10:03 GMT
I wonder if it's time for Proplend to reconsider the priority repayment order. I really don't want to sound like a whinging loser. I'm in tranches B and C. I was fully aware of the repayment priorities when I subscribed to this loan. If I end up with losses, I will take it on the chin. I'm also not suggesting that any extant contracts should be changed. Contracts should be immutable, even if your name is Assetz Capital. I'm just suggesting that an alternative priority order be considered for future loans. This loan really makes it clear how much extra risk is taken by higher tranche loans. Before PG and any other recovery options are pursued, the position is (and I'm not suggesting that there won't be further recoveries here): - Tranche A - 8.11% - complete recovery of all capital and all accrued interest and fees paid.
- Tranche B - 11.0% - so far, a 39% capital loss.
- Tranche C - 14.0% - so far, a compete capital loss.
The current priority order for lenders is: - Tranche A Capital
- Tranche A Interest and fees
- Tranche B Capital
- Tranche B Interest and fees
- Tranche C Capital
- Tranche C Interest and fees
A major problem with this is that, even though the Tranche LTV boundaries are well defined at the start they can change substantially if the default drags on for any length of time, as Tranche A Interest, penalty interest, and fees can push the Tranche B starting LTV boundary a lot higher than 50%. Would it not be better to prevent capital losses to as many lenders as possible before paying out profits? Either that or increase the differentials to better balance/reward the risk. So the priority order would be: - Tranche A Capital
- Tranche B Capital
- Tranche C Capital
- Tranche A Interest and fees
- Tranche B Interest and fees
- Tranche C Interest and fees
This is somewhat borne out by Proplend's statistics, which show that the expected returns after losses are Tranche A 6.05%, Tranche B 5.87% and Tranche C 4.81%. I know that HNW changed their priority repayment order as suggested above after having a lower priority tranche wiped out. In that case, the recovery took a very long time, so the accrued interest on the higher priority tranche was largely to blame for the lower priority tranche being wiped out. I suppose that an easy argument against this suggestion would be that Proplend currently have no problems filing the various tranches as they are. What do others think? You sound like a whinging loser
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eeyore
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Post by eeyore on Aug 15, 2023 17:17:30 GMT
Fair points. Perhaps the capital and interest of higher risk tranches should be subtracted from their capital paybacks until lower risk tranches have received their interest. Effectively a clawback. Ace Did you really mean to say that? In effect, that's the current situation!
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Post by Ace on Aug 15, 2023 17:23:27 GMT
Fair points. Perhaps the capital and interest of higher risk tranches should be subtracted from their capital paybacks until lower risk tranches have received their interest. Effectively a clawback. Ace Did you really mean to say that? In effect, that's the current situation! Will spotted . No, I meant that the paid interest of higher risk tranches should be subtracted from their capital paybacks until lower risk tranches have received their interest. EDIT: corrected above.
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sapphire
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Post by sapphire on Aug 16, 2023 7:52:28 GMT
As a Tranche A investor, I think it would be fair if penalty interest on Tr A was paid after capital repayments on higher tranches.
In the current scheme of things, any delays in repayment appear to benefit Tr A disproportionately, particularly due to the penalty interest component and potentially result in greater capital losses to the higher tranches.
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Post by Ace on Aug 16, 2023 18:13:20 GMT
The outstanding capital in this loan for tranches B & C has been written-off on the platform. This allows lenders to offset interest for tax purposes. Doesn't help me as my loans were ISA wrapped. The total amount owing is within the scope of the PG, so there is hope of recovery.
This reduces my platform XIRR from 9.76% to 7.90%.
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mcfc
I’m invested in Qardus, Loanpad, Proplend, and Crowproperty
Posts: 91
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Post by mcfc on Apr 4, 2024 15:49:59 GMT
Proplend have given an update on the website that may be of interest to those invested in Tranches B and C
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