agent69
Member of DD Central
Posts: 6,034 
Likes: 4,432
Member is Online
|
Post by agent69 on Dec 30, 2013 10:04:03 GMT
It also bares resemblance to allowing / encouraging the flippers to come in, something the lending community has been very against. I can only speak from a technical point of view, so this isn't an official line of thought from the business, but what would people think of opening up loans like this one that aren't filling naturally to selling loan units for a profit on the aftermarket? Would that encourage people to lend now rather than wait? After all it does look like we need to do something to get this one over the line, be it just marketing it out to the user base again through to bringing in additional underwriting. I don't see how you can allow selling loan parts for a profit while the privileged few are allowed to bid early. Would be ripe for abuse. Addressing the issues that potential investors have would be better (for example the likely time the funds will be tied up before draw down and the apparent reluctance to answer questions). Maybe it's just not good value for money in it's current format!
|
|
|
|
Post by chris on Dec 30, 2013 10:26:50 GMT
bugs4me - My understanding on some of this is limited as I'm not involved in the operational side of running things on a day to day basis beyond the technical aspects, so do take all I say with a healthy pinch of salt. The underwriting costs aren't always borne by the borrower they can also come out of our own margins. Either way the cost of underwriting is a factor that can make us less attractive as a proposition to borrowers in an increasingly competitive marketplace, and whilst we currently have our niche and are performing well my relatively uneducated guess would be that ultimately we'll need to lower our costs in order to expand. I'm sure as our volume of lenders grows then this will become less of an issue but there could be a crunch point in the middle of that timeline whereby underwriting is still needed but the cost keeps us from certain markets and limits our growth. Underwriters also tend to get paid based on the amount they pledge up front, rather than the amount left at the end of the auction. We want to reduce the amount underwritten as it keeps our underwriter's funds liquid and available for the next loan, rather than reducing costs. If we offer the ability to mark up loan units on the aftermarket on selected loans when they are struggling to fill then this may not even help in the intended manner. It could encourage lenders not to put money into loans until this ability is triggered thus making it more likely to happen. The moral objection to markup seems to revolve around smaller investors losing out if they cannot place bids due to larger players moving in, filling the loan, and then flipping. There are other mechanisms that can be used to eliminate that original issue of smaller investors losing out - such as ensuring that loans can be oversubscribed and that loan units are then distributed equally or biased towards the smallest bidders (e.g. if you bid £100 and the bids are such that everyone who bid could receive at least £100 then you get the full £100, but someone who bid £10,000 may only get £5,000 depending on the distribution of other bids). We seem to be experiencing the flip side of this balance on some of our biggest loans whereby smaller investors aren't placing bids as they wait and see if the loan is going to fill or they want to buy on the aftermarket from the underwriter (with someone else bearing the costs) in order to minimise the "down time" of their funds. There is a very careful balancing act to be made and I'm not convinced that the status quo or opening things up completely to flippers is the right answer. There's a certain amount of wanting the cake and eating it from all sides, including my own selfish views as a part owner of the platform.
|
|
|
|
Post by chris on Dec 30, 2013 10:35:09 GMT
I don't see how you can allow selling loan parts for a profit while the privileged few are allowed to bid early. Would be ripe for abuse. Addressing the issues that potential investors have would be better (for example the likely time the funds will be tied up before draw down and the apparent reluctance to answer questions). Maybe it's just not good value for money in it's current format! I'm sure the questions will be answered as soon as we are able - I'll chase internally to see if I can move that along. My reference to selling for profit was specifically for loans like this where there has been plenty of time for people to bid but there appears a reluctance to do so. In this instance I understand that this is partly due to the lack of answers to some questions, which we would certainly need to address first and foremost, but that aside if a loan isn't filling then there can't be abuse by "the privileged few" bidding early. Drawdown times are minimised as much as we can and we are constantly working on this. But there are certain limitations that will always occur on secured loans which will make us look slow compared to our unsecured peers. There are legal processes that cannot be started until we can guarantee fulfilment of the loan, and even though we are statistically likely to fulfil the majority of loans we list it's beyond my pay grade to know whether or not that is enough from a legal, risk and compliance side of things.
|
|
bugs4me
Member of DD Central
Posts: 1,845
Likes: 1,478
|
Post by bugs4me on Dec 30, 2013 10:40:46 GMT
It also bares resemblance to allowing / encouraging the flippers to come in, something the lending community has been very against. I can only speak from a technical point of view, so this isn't an official line of thought from the business, but what would people think of opening up loans like this one that aren't filling naturally to selling loan units for a profit on the aftermarket? Would that encourage people to lend now rather than wait? After all it does look like we need to do something to get this one over the line, be it just marketing it out to the user base again through to bringing in additional underwriting. I don't see how you can allow selling loan parts for a profit while the privileged few are allowed to bid early. Would be ripe for abuse. Addressing the issues that potential investors have would be better (for example the likely time the funds will be tied up before draw down and the apparent reluctance to answer questions). Maybe it's just not good value for money in it's current format! The draw down time delay is certainly a factor in my book especially with the shorter term loans and that is where possibly the value for money aspect comes into play. Otherwise I think AC is good value for money provided you are prepared for the loan to run it's term - plus of course with a bit of luck there will not be an early redemption. If you can be quick enough in the aftermarket, subject of course to there being any loan parts available, then these are good value as they start earning from the minute you buy.
|
|
agent69
Member of DD Central
Posts: 6,034
Likes: 4,432
Member is Online
|
Post by agent69 on Dec 30, 2013 11:00:29 GMT
I appreciate that all the P2B platforms are different, but it does appear that AC draw down times are significantly longer than others.
How about a system where interest accrues from a set time after the loan is fully funded (say 4 weeks)?
|
|
|
|
Post by chris on Dec 30, 2013 11:04:06 GMT
I appreciate that all the P2B platforms are different, but it does appear that AC draw down times are significantly longer than others. How about a system where interest accrues from a set time after the loan is fully funded (say 4 weeks)? We're working on some variations on that theme but have to make sure they're legal.
|
|
bugs4me
Member of DD Central
Posts: 1,845
Likes: 1,478
|
Post by bugs4me on Dec 30, 2013 11:11:44 GMT
I don't see how you can allow selling loan parts for a profit while the privileged few are allowed to bid early. Would be ripe for abuse. Addressing the issues that potential investors have would be better (for example the likely time the funds will be tied up before draw down and the apparent reluctance to answer questions). Maybe it's just not good value for money in it's current format! I'm sure the questions will be answered as soon as we are able - I'll chase internally to see if I can move that along. My reference to selling for profit was specifically for loans like this where there has been plenty of time for people to bid but there appears a reluctance to do so. In this instance I understand that this is partly due to the lack of answers to some questions, which we would certainly need to address first and foremost, but that aside if a loan isn't filling then there can't be abuse by "the privileged few" bidding early. Drawdown times are minimised as much as we can and we are constantly working on this. But there are certain limitations that will always occur on secured loans which will make us look slow compared to our unsecured peers. There are legal processes that cannot be started until we can guarantee fulfilment of the loan, and even though we are statistically likely to fulfil the majority of loans we list it's beyond my pay grade to know whether or not that is enough from a legal, risk and compliance side of things. Chris - I'm sure AC do everything in their power to minimise the drawdown time but the downside for lenders/investors is the returns in real time are impacted on by these (unavoidable) delays. Far easier would be to allow an extension of shadow bids which only needed to be settled within say 7 days of drawdown. How that would sit with AC management I have no idea. Also those that did not fulfil their obligations I haven't thought through. I do though think a compromise of sorts must be found - especially in the shorter market.
|
|
|
|
Post by chris on Dec 30, 2013 11:16:41 GMT
It's appealing, but again is awaiting feedback from our legal and compliance teams to make sure that what we want to offer will be legal.
|
|
j
Member of DD Central
Penguins are very misunderstood!
Posts: 2,188
Likes: 540
|
Post by j on Dec 30, 2013 12:58:08 GMT
It also bares resemblance to allowing / encouraging the flippers to come in, something the lending community has been very against. I can only speak from a technical point of view, so this isn't an official line of thought from the business, but what would people think of opening up loans like this one that aren't filling naturally to selling loan units for a profit on the aftermarket? Would that encourage people to lend now rather than wait? After all it does look like we need to do something to get this one over the line, be it just marketing it out to the user base again through to bringing in additional underwriting. Chris One of the main reasons I invest solely with AC now is that no flippers are allowed. I have sold on the aftermarket on many occasions & happily bore the small charge involved (sometimes losing a bit when I needed funds urgently) because it's a fairer system for all & does not allow people to abuse the platform for small but quick gains. This is a unique USP of AC & I sincerely hope it stays that way. I also agree with fellow lenders that the draw down issue must be resolved somehow. Even if AC has an 'anticipated' date they can pass on to lenders so they can make an educated judgement when & how much to pledge on individual loans. Have you thought of increasing the rate or bonus on the Devon loan slightly to ensure quick & full take up, whilst balancing against underwriter fees?
|
|
|
|
Post by chris on Dec 30, 2013 13:33:28 GMT
Have you thought of increasing the rate or bonus on the Devon loan slightly to ensure quick & full take up, whilst balancing against underwriter fees? Not my department but I'm sure this is being considered along with various other options. Has to remain affordable for all parties though (borrower, lender, broker and platform).
|
|
agent69
Member of DD Central
Posts: 6,034
Likes: 4,432
Member is Online
|
Post by agent69 on Dec 30, 2013 13:35:15 GMT
Just gone from 91% to 93% funded, thanks to a bid of £37k.
|
|
|
|
Post by chris on Dec 30, 2013 13:37:05 GMT
I've been informed that two key questions in the Q&A section have now been answered. We are limited to a degree by the anonymous nature of the auction so there is still a gap in the background and on the liquidation of the subsidiary. Our RM is still liaising with the borrower to try and agree further responses.
|
|
bugs4me
Member of DD Central
Posts: 1,845
Likes: 1,478
|
Post by bugs4me on Dec 30, 2013 13:46:53 GMT
So just out of interest as I'm not up to speed with these things. The HW loan is now fully funded with bids from lenders plus underwriting. Could the preliminaries not be commenced and the availability to bid still remain. Or does it have to run it's full term - another 10 days before anything can move on the paperwork front. Clarification (for myself) would be appreciated.
|
|
bugs4me
Member of DD Central
Posts: 1,845
Likes: 1,478
|
Post by bugs4me on Dec 30, 2013 13:53:12 GMT
I've been informed that two key questions in the Q&A section have now been answered. We are limited to a degree by the anonymous nature of the auction so there is still a gap in the background and on the liquidation of the subsidiary. Our RM is still liaising with the borrower to try and agree further responses.Judging by the answers it looks like this could be one of those long winded drawdowns - hopefully that will not be the case. If however the loan should not proceed within a reasonable timescale then it will have a severe impact on the annual 10.8% being offered. This may be another factor holding the bidding back in addition to (possibly) unanswered questions. Just a thought.
|
|
|
|
Post by chris on Dec 30, 2013 13:55:05 GMT
So just out of interest as I'm not up to speed with these things. The HW loan is now fully funded with bids from lenders plus underwriting. Could the preliminaries not be commenced and the availability to bid still remain. Or does it have to run it's full term - another 10 days before anything can move on the paperwork front. Clarification (for myself) would be appreciated. Yes it is full and yes the preliminaries are already as well underway as they can be given the time of year and reliance on some third parties.
|
|
