shimself
Member of DD Central
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Post by shimself on May 12, 2021 12:52:13 GMT
Please see below an update to our T&Cs around capital and interest being paid. 8a. Compound Interest In the event that there is a repayment shortfall from the borrower, the order of the payment priority is the following: Firstly, capital will be repaid proportionally to all investors, Secondly, any unpaid interest (simple or compounded) will be repaid proportionally to all investors. This is different to that of tiered loans as each tier of the loan will be paid capital and interest in order, i.e. Tier 1 capital and interest repaid followed by Tier 2 capital and interest and so on (for the tiered loans T&Cs please read Part 7)
What does Firstly, capital will be repaid proportionally to all investors, mean? .
And please any unpaid interest (simple or compounded) will be repaid proportionally to all investors. This is just insanely incompetent. You cannot repay unpaid interest.
This section is headed Compound Interest and then goes on to discuss simple interest.
This is different to tiered loans as each tier.... So tiered loans are different from tiered loans, is that what you are saying
I promise you I try my very hardest to avoid lawyers, but you really really need someone who is capable of writing clearly. Of thinking clearly. If push comes to shove every investor can interpret that they are in the front of the queue, you might even finish up having to dig into your own pockets if a loan is not fully repaid.
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Post by overthehill on May 20, 2022 17:33:19 GMT
I don't know how these tiered loans work in practice when it matters , I only invest in Tier 1.
There was a new loan added today which appears not quite right. Supposedly it was a Tranche 3 , yet only 3 related loans are linked to it, Tranche 1 (Tier 1, Tier 2 , Tier 3).
How can you have a non-tier subsequent Tranche after a tiered Tranche ? Which tier is it in, it certainly doesn't say?
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Post by Ace on May 20, 2022 18:11:53 GMT
I don't know how these tiered loans work in practice when it matters , I only invest in Tier 1.
There was a new loan added today which appears not quite right. Supposedly it was a Tranche 3 , yet only 3 related loans are linked to it, Tranche 1 (Tier 1, Tier 2 , Tier 3).
How can you have a non-tier subsequent Tranche after a tiered Tranche ? Which tier is it in, it certainly doesn't say?
It looks like the new tranche has been incorrectly labelled as Tranche 3 when it should be Tranche 2. This new tranche isn't tiered, so it occupies the full 0 to 57% LTGDV range, effectively occupying all 3 tiers of the Tranche 1 loans. It's further confused by the Tranche 1 loans being quoted against LTV, while this new tranche is quoted against the LTGDV. If the loan defaulted and only recovered sufficient funds to repay at the full Tier 1 capital level after costs then; - Tranche 1 Tier 1 would receive a full capital return.
- Tranche 1 Tier 2 would lose all capital.
- Tranche 1 Tier 3 would lose all capital.
- This new tranche would receive 31.43% of their capital back (since Tier 1 represented 31.43% of the original Tranche 1 loan).
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Post by overthehill on May 20, 2022 19:06:02 GMT
I don't know how these tiered loans work in practice when it matters , I only invest in Tier 1.
There was a new loan added today which appears not quite right. Supposedly it was a Tranche 3 , yet only 3 related loans are linked to it, Tranche 1 (Tier 1, Tier 2 , Tier 3).
How can you have a non-tier subsequent Tranche after a tiered Tranche ? Which tier is it in, it certainly doesn't say?
It looks like the new tranche has been incorrectly labelled as Tranche 3 when it should be Tranche 2. This new tranche isn't tiered, so it occupies the full 0 to 57% LTGDV range, effectively occupying all 3 tiers of the Tranche 1 loans. It's further confused by the Tranche 1 loans being quoted against LTV, while this new tranche is quoted against the LTGDV. If the loan defaulted and only recovered sufficient funds to repay at the full Tier 1 capital level after costs then; - Tranche 1 Tier 1 would receive a full capital return.
- Tranche 1 Tier 2 would lose all capital.
- Tranche 1 Tier 3 would lose all capital.
- This new tranche would receive 31.43% of their capital back (since Tier 1 represented 31.43% of the original Tranche 1 loan).
That is totally negligent and should be emblazoned over any new tranche with previous tiered tranches. How many investors are not aware of this ?!
Never liked their tier system from day 1, it's time to bin it before it is needed.
EDIT: ignore 1st line above, misunderstanding.
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Post by Ace on May 20, 2022 19:42:54 GMT
It looks like the new tranche has been incorrectly labelled as Tranche 3 when it should be Tranche 2. This new tranche isn't tiered, so it occupies the full 0 to 57% LTGDV range, effectively occupying all 3 tiers of the Tranche 1 loans. It's further confused by the Tranche 1 loans being quoted against LTV, while this new tranche is quoted against the LTGDV. If the loan defaulted and only recovered sufficient funds to repay at the full Tier 1 capital level after costs then; - Tranche 1 Tier 1 would receive a full capital return.
- Tranche 1 Tier 2 would lose all capital.
- Tranche 1 Tier 3 would lose all capital.
- This new tranche would receive 31.43% of their capital back (since Tier 1 represented 31.43% of the original Tranche 1 loan).
That is totally negligent and should be emblazoned over any new tranche with previous tiered tranches. How many investors are not aware of this ?! Never liked their tier system from day 1, it's time to bin it before it is needed.
I think that's a bit harsh. I understand why it might seem that way at first sight, but that fact that the first tranche was tiered is totally irrelevant to anyone investing in the untiered second tranche. The tranches rank pari passu. It's only the tiers that have repayment precedence among themselves. In the above example, where there was a 31.43% recovery after costs, an investor in the second (untiered) tranche received a 31.43% recovery. That's exactly the same as an untiered single tranche loan with a 31.43% recovery. So, if a tranche is untiered you can completely disregard whether any previous or future tranches are tiered. Whether the tiers are correctly priced of course is an entirely different question. I think the above example illustrates perfectly clearly that they are not. In this loan the difference in reward between a complete recovery and a total loss was only 0.2%! I've been banging on about this for a very long time now. I think the rate difference between tiers has increased a little over time, but IMO the gaps are still way too small; much smaller than all other tiered platforms that I'm aware of.
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Post by overthehill on May 20, 2022 19:53:32 GMT
That is totally negligent and should be emblazoned over any new tranche with previous tiered tranches. How many investors are not aware of this ?! Never liked their tier system from day 1, it's time to bin it before it is needed.
I think that's a bit harsh. I understand why it might seem that way at first sight, but that fact that the first tranche was tiered is totally irrelevant to anyone investing in the untiered second tranche. The tranches rank pari passu. It's only the tiers that have repayment precedence among themselves. In the above example, where there was a 31.43% recovery after costs, an investor in the second (untiered) tranche received a 31.43% recovery. That's exactly the same as an untiered single tranche loan with a 31.43% recovery. So, if a tranche is untiered you can completely disregard whether any previous or future tranches are tiered. Whether the tiers are correctly priced of course is an entirely different question. I think the above example illustrates perfectly clearly that they are not. In this loan the difference in reward between a complete recovery and a total loss was only 0.2%! I've been banging on about this for a very long time now. I think the rate difference between tiers has increased a little over time, but IMO the gaps are still way too small; much smaller than all other tiered platforms that I'm aware of. Thanks. I had a rushed dry mouth panic moment regarding how an incomplete recovery affected latter untiered tranches. The interest rate margins are nonsense and I do believe they have widened as well. Proplend has it about right.
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Post by Ace on May 20, 2022 20:06:43 GMT
I think that's a bit harsh. I understand why it might seem that way at first sight, but that fact that the first tranche was tiered is totally irrelevant to anyone investing in the untiered second tranche. The tranches rank pari passu. It's only the tiers that have repayment precedence among themselves. In the above example, where there was a 31.43% recovery after costs, an investor in the second (untiered) tranche received a 31.43% recovery. That's exactly the same as an untiered single tranche loan with a 31.43% recovery. So, if a tranche is untiered you can completely disregard whether any previous or future tranches are tiered. Whether the tiers are correctly priced of course is an entirely different question. I think the above example illustrates perfectly clearly that they are not. In this loan the difference in reward between a complete recovery and a total loss was only 0.2%! I've been banging on about this for a very long time now. I think the rate difference between tiers has increased a little over time, but IMO the gaps are still way too small; much smaller than all other tiered platforms that I'm aware of. Thanks. I had a rushed dry mouth panic moment regarding how an incomplete recovery affected latter untiered tranches. The interest rate margins are nonsense and I do believe they have widened as well. Proplend has it about right.
I totally agree. I think that Landlordinvest, CapitalStackers, Shojin and SoMo also get the rate margins about right. It doesn't help that they all have different names for them though: tiers on K, tranches on PL and SoMo, junior/senior on LandlordInvest, levels on CapitalStackers, and mezzanine/preferred equity on shojin to name a few. If only there were some sort of ruling body that insisted on some standardisation of terms...
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rocky1
Member of DD Central
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Post by rocky1 on May 21, 2022 5:52:21 GMT
i would call them SECOND CHARGES. ok low LTGDVs but a lot more risk if a loan defaults especially for tier 3 when receivers/legals/administrators become involved. all default interest belongs to kuflink. if paid back of course.
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Post by Badly Drawn Stickman on May 21, 2022 8:15:24 GMT
i would call them SECOND CHARGES. ok low LTGDVs but a lot more risk if a loan defaults especially for tier 3 when receivers/legals/administrators become involved. all default interest belongs to kuflink. if paid back of course. I am inclined to agree, if the initial raise is tiered anything after that should be considered separate and be second ranking to the initial raise. in this case Tier 1 represented 22% of the open market valuation, investors would quite rightly consider that a fixed position (despite the plan being to flatten the building). I am not sure how Kuflink are interpreting this but would suggest they need to give clarity otherwise there could be many unhappy investors if thing go wrong with the project.
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Post by Ace on May 21, 2022 8:26:10 GMT
i would call them SECOND CHARGES. ok low LTGDVs but a lot more risk if a loan defaults especially for tier 3 when receivers/legals/administrators become involved. all default interest belongs to kuflink. if paid back of course. Tiers are very similar to second charges, but they are not the same. The essential difference is that tiers within a first charge are much less complicated for the charge holder to handle in the case of default, as its the same charge holder (in this case Kuflink) for all of the tiers. With a true second charge there is a different organisation the holds the first charge that needs to be considered, and who's interests and priorities will be different to the second charge holder. The key feature being that the first charge holder doesn't need the security to achieve as high a value as the second charge holder does to secure full repayment.
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Post by overthehill on May 21, 2022 8:45:19 GMT
And of course second charges with different lenders means two sets of fees adding to costs.
As I think with most p2p lenders, Kuflink tier definition applies to capital and interest which makes 2nd,3rd,n tiers LTV unreliable in a messy incomplete recovery.
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rocky1
Member of DD Central
Posts: 1,118
Likes: 1,937
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Post by rocky1 on May 21, 2022 10:13:28 GMT
i would call them SECOND CHARGES. ok low LTGDVs but a lot more risk if a loan defaults especially for tier 3 when receivers/legals/administrators become involved. all default interest belongs to kuflink. if paid back of course. Tiers are very similar to second charges, but they are not the same. The essential difference is that tiers within a first charge are much less complicated for the charge holder to handle in the case of default, as its the same charge holder (in this case Kuflink) for all of the tiers. With a true second charge there is a different organisation the holds the first charge that needs to be considered, and who's interests and priorities will be different to the second charge holder. The key feature being that the first charge holder doesn't need the security to achieve as high a value as the second charge holder does to secure full repayment. i can see what you are saying Ace but the tier system is loaded in KFs favour to handle a loan if it defaults. if there is a shortfall only lenders will suffer with maybe kuflinks 5%.i noticed that there is no skin in the latest tiered loan on the weed farm
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