sqh
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Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Feb 16, 2015 15:07:01 GMT
I believe this is the first Capital Loss on FS.
A pair of rings valued at £2800 and £350 sold for a combined total of £1688 net of charges, well below the loan value of £2200.
I would have expected a reserve of £2000.
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mikes1531
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Post by mikes1531 on Feb 16, 2015 15:44:47 GMT
A pair of rings valued at £2800 and £350 sold for a combined total of £1688 net of charges, well below the loan value of £2200. Wow! Sale proceeds were just 53.6% of the valuation, which suggests that the risk of making a 70% LTV loan is substantial. I can't help wondering whether the borrower is watching this and laughing. Having lost nearly a quarter of the capital lent, lenders will need to have four similar-sized successful loans to recoup the capital lost here in order just to break even before tax. Including the unfavourable tax treatment for capital losses, basic rate taxpayers would need to have five successful loans to make up for the single bad one and break even after tax, and higher rate taxpayers would need to have about seven successful loans to make up for the single bad one and break even after tax. I wonder how badly this will dampen the enthusiasm of FS's lenders. I have always known that I was taking a risk when lending via FS, but I always thought that the main risk was that the sale proceeds from a default would be insufficient to pay the accrued interest and that I would end up having made an investment and received no return. I knew there also was a risk of losing capital, but I thought that risk was small, and that any capital loss would be minimal. This incident show that my thinking was wrong and that large capital losses are very possible, though I suppose the MJ memorabilia loans should have alerted me to this possibility. I suppose the impact of this disappointing outcome on fundingsecure's business/model depends a lot on how deeply FS hide the report of this incident.
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ramblin rose
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Post by ramblin rose on Feb 16, 2015 15:47:06 GMT
As I've said on another thread - my commiserations to all those who lent on this; it was a loan that I'd definitely have been involved in to the max allowed if I'd been around, so I've had a lucky escape. When I've bleated on about 70% LTVs being too high in the past I've been, not too unreasonably, told that if they were lower, we wouldn't get enough loans. This is true, I have no doubt, and we do have to expect the occasional loss (that's why I don't think it's worth lending at the lower rates we are more frequently being offered lately). It would be silly of me to say we shouldn't take loans at 70% LTV, since almost all of them come good, but I still think it needs more thought. I'm concerned about how this valuation was so very far out? I'm sure fundingsecure are pretty well annoyed about it. I wonder if they'd be able to share any knowledge or insight about that with us? I would welcome some comment, because it certainly knocks my confidence on the diamond valuations for the moment. |
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ramblin rose
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“Some people grumble that roses have thorns; I am grateful that thorns have roses.” — Alphonse Karr
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Post by ramblin rose on Feb 16, 2015 16:24:11 GMT
As I've said on another thread - my commiserations to all those who lent on this; it was a loan that I'd definitely have been involved in to the max allowed if I'd been around, so I've had a lucky escape. When I've bleated on about 70% LTVs being too high in the past I've been, not too unreasonably, told that if they were lower, we wouldn't get enough loans. This is true, I have no doubt, and we do have to expect the occasional loss (that's why I don't think it's worth lending at the lower rates we are more frequently being offered lately). It would be silly of me to say we shouldn't take loans at 70% LTV, since almost all of them come good, but I still think it needs more thought. I'm concerned about how this valuation was so very far out? I'm sure fundingsecure are pretty well annoyed about it. I wonder if they'd be able to share any knowledge or insight about that with us? I would welcome some comment, because it certainly knocks my confidence on the diamond valuations for the moment. . I've done a quick check of the jewellery loans on MoneyThing and using today's gold price, all but 3 of the loans including charges are well covered by the scrap value. The 3 not covered fall marginally below (less than £20) of the recovery needed. Perhaps FS should base their valuations / loans on the scrap value as retail values are very much dependant on personal preferences Was wondering when somebody was going to bring up MoneyThing on this thread  It won't have done them any harm, but I avoided it because I like FS and didn't want to kick them too hard when they were down  I'd definitely like to know what FS think about the valuation on this one. I don't think scrap metal value would have been applicable though in this case because the rings were much more diamond than metal. Something went badly wrong though.
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bugs4me
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Post by bugs4me on Feb 16, 2015 16:36:03 GMT
A pair of rings valued at £2800 and £350 sold for a combined total of £1688 net of charges, well below the loan value of £2200. Wow! Sale proceeds were just 53.6% of the valuation, which suggests that the risk of making a 70% LTV loan is substantial. I can't help wondering whether the borrower is watching this and laughing. Having lost nearly a quarter of the capital lent, lenders will need to have four similar-sized successful loans to recoup the capital lost here in order just to break even before tax. Including the unfavourable tax treatment for capital losses, basic rate taxpayers would need to have five successful loans to make up for the single bad one and break even after tax, and higher rate taxpayers would need to have about seven successful loans to make up for the single bad one and break even after tax. I wonder how badly this will dampen the enthusiasm of FS's lenders. I have always known that I was taking a risk when lending via FS, but I always thought that the main risk was that the sale proceeds from a default would be insufficient to pay the accrued interest and that I would end up having made an investment and received no return. I knew there also was a risk of losing capital, but I thought that risk was small, and that any capital loss would be minimal. This incident show that my thinking was wrong and that large capital losses are very possible, though I suppose the MJ memorabilia loans should have alerted me to this possibility. I suppose the impact of this disappointing outcome on fundingsecure's business/model depends a lot on how deeply FS hide the report of this incident. I don't think FS are trying to hide this in any way as it's on the 'My Investment History' tab. But as only a minority of lenders visit the forum I expect there will still be the normal scrum for these types of loans. I think there may have been losses in the past where FS have made up the difference although that is just guesswork on my part. No doubt though that as the popularity of the platform has grown then they no longer feel the need to do so. So lender beware time. There are a couple more jewellery loans that I'm involved in that have defaulted and due to be auctioned early March. We'll see how well the valuations hold up on those two - I'm not hopeful though.
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merlin
Minor shareholder in Assetz and many other companies.
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Post by merlin on Feb 16, 2015 16:36:02 GMT
Has the drop in the price of gold had anything to do with this disappointment. I was not in FS when this first kicked off so am a bit short on facts.
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Post by mrclondon on Feb 16, 2015 16:36:55 GMT
Commiserations indeed to those involved in this one, a bullet I've managed to dodge somehow. mikes1531 has been posting at regular intervals on the forum about the need for much greater transparency regarding the disposal of assets against defaulted loans. With the advent of capital losses fundingsecure are going to lose credibility very quickly unless they can demonstrate that the actions they have taken to recover this loan (and indeed all defaulted loans) are really the best that could have been achieved in the circumstances. The loan listing suggests the auction was due at the beginning of February, (and today is the 16th), so in the absence of other facts it would be plausible to assume that at least one of the items failed to sell at auction, and has subsequently been disposed of in a true fire sale. I have suggested to FS in the past that they should give us advance warning of the auctions as in some cases lenders may be interested in acquiring the items at auction reserve price. I can see no justification for the secrecy involved in the disposal process at at Funding Secure, nor for the less than complete information made available to lenders concerning the previous track record of borrowers on the platform when they return for subsequent loans. Its also worth remembering that MoneyThing has claimed that the originator of the (pawn) loan is obliged to buy back defaulted loans from the platform. If true, only if the loan originator were to fail would the LTV be of relevance. |
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ramblin rose
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Post by ramblin rose on Feb 16, 2015 16:43:54 GMT
Has the drop in the price of gold had anything to do with this disappointment. I was not in FS when this first kicked off so am a bit short on facts. I'd be very surprised. On 16th May (when this loan started) the $ price of gold was only a little higher than it has been for most of Feb ($1300 ish v $1250 ish). And as I mentioned above - these rings were more diamond than metal.
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ramblin rose
Member of DD Central
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Post by ramblin rose on Feb 16, 2015 16:51:58 GMT
Wow! Sale proceeds were just 53.6% of the valuation, which suggests that the risk of making a 70% LTV loan is substantial. I can't help wondering whether the borrower is watching this and laughing. Having lost nearly a quarter of the capital lent, lenders will need to have four similar-sized successful loans to recoup the capital lost here in order just to break even before tax. Including the unfavourable tax treatment for capital losses, basic rate taxpayers would need to have five successful loans to make up for the single bad one and break even after tax, and higher rate taxpayers would need to have about seven successful loans to make up for the single bad one and break even after tax. I wonder how badly this will dampen the enthusiasm of FS's lenders. I have always known that I was taking a risk when lending via FS, but I always thought that the main risk was that the sale proceeds from a default would be insufficient to pay the accrued interest and that I would end up having made an investment and received no return. I knew there also was a risk of losing capital, but I thought that risk was small, and that any capital loss would be minimal. This incident show that my thinking was wrong and that large capital losses are very possible, though I suppose the MJ memorabilia loans should have alerted me to this possibility. I suppose the impact of this disappointing outcome on fundingsecure's business/model depends a lot on how deeply FS hide the report of this incident. I don't think FS are trying to hide this in any way as it's on the 'My Investment History' tab. But as only a minority of lenders visit the forum I expect there will still be the normal scrum for these types of loans. I think there may have been losses in the past where FS have made up the difference although that is just guesswork on my part. No doubt though that as the popularity of the platform has grown then they no longer feel the need to do so. So lender beware time. There are a couple more jewellery loans that I'm involved in that have defaulted and due to be auctioned early March. We'll see how well the valuations hold up on those two - I'm not hopeful though. I think being in the 'My Investment History' tab of just 25 lenders (if you exclude hackin8 which I believe to have been an internal FS user used to soak up the odds and ends that used to get left at the end of loans before the fixed £25 bids came in) counts as pretty hidden . I think mikes1531 probably meant how hidden from the public at large it might be. There have been two more at auction this month; one returned all capital and all 9 months worth of outstanding interest. The other returned all capital and a large proportion of the outstanding interest, giving a 10.85% return on the loan. So don't lose all your hope bugsy - they don't all turn out bad 
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bugs4me
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Post by bugs4me on Feb 16, 2015 17:01:13 GMT
I don't think FS are trying to hide this in any way as it's on the 'My Investment History' tab. But as only a minority of lenders visit the forum I expect there will still be the normal scrum for these types of loans. I think there may have been losses in the past where FS have made up the difference although that is just guesswork on my part. No doubt though that as the popularity of the platform has grown then they no longer feel the need to do so. So lender beware time. There are a couple more jewellery loans that I'm involved in that have defaulted and due to be auctioned early March. We'll see how well the valuations hold up on those two - I'm not hopeful though. I think being in the 'My Investment History' tab of just 25 lenders (if you exclude hackin8 which I believe to have been an internal FS user used to soak up the odds and ends that used to get left at the end of loans before the fixed £25 bids came in) counts as pretty hidden . I think mikes1531 probably meant how hidden from the public at large it might be. There have been two more at auction this month; one returned all capital and all 9 months worth of outstanding interest. The other returned all capital and a large proportion of the outstanding interest, giving a 10.85% return on the loan. So don't lose all your hope bugsy - they don't all turn out bad - point taken and unless lenders visit this forum then yes, it probably could/would be classified as 'hidden'. Of course the majority turn out just fine and I'm still very much involved with FS and will continue to be. Fortunately my exposure was very limited on this loan but it does call into question the initial valuations of items especially as this was one of the FS smaller loans. Since then of course they've starting listing far higher value items which if one of them went south then I'm sure the guillotine may come out and not for the individual that has defaulted but for the individual that did the valuation.
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ramblin rose
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Post by ramblin rose on Feb 16, 2015 17:08:49 GMT
.....................Fortunately my exposure was very limited on this loan but it does call into question the initial valuations of items especially as this was one of the FS smaller loans. Since then of course they've starting listing far higher value items which if one of them went south then I'm sure the guillotine may come out and not for the individual that has defaulted but for the individual that did the valuation. Yes, indeed. Let's see whether they take up my suggestion above to talk to us about this valuation - it definitely deserves some comment
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ramblin rose
Member of DD Central
“Some people grumble that roses have thorns; I am grateful that thorns have roses.” — Alphonse Karr
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Post by ramblin rose on Feb 16, 2015 17:36:18 GMT
Hadn't thought to check whether they still log in. I've just suggested that they join us for a chat  (I'm saving the next glass of wine for my annual bath in an hour or so.....................) |
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sqh
Member of DD Central
Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Feb 16, 2015 17:43:16 GMT
A pair of rings valued at £2800 and £350 sold for a combined total of £1688 net of charges, well below the loan value of £2200. I wonder how badly this will dampen the enthusiasm of FS's lenders. I have always known that I was taking a risk when lending via FS, but I always thought that the main risk was that the sale proceeds from a default would be insufficient to pay the accrued interest and that I would end up having made an investment and received no return. I knew there also was a risk of losing capital, but I thought that risk was small, and that any capital loss would be minimal. This incident show that my thinking was wrong and that large capital losses are very possible, though I suppose the MJ memorabilia loans should have alerted me to this possibility. The most capital lost by an individual lender is £23.27. So I don't think that will stop lenders investing in FS. What I find strange is that these were very normal looking modern diamond engagement and eternity rings, made from 18ct white gold. The sort of item that any jeweller would be able to value very easily.
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ramblin rose
Member of DD Central
“Some people grumble that roses have thorns; I am grateful that thorns have roses.” — Alphonse Karr
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Post by ramblin rose on Feb 16, 2015 17:47:46 GMT
I wonder how badly this will dampen the enthusiasm of FS's lenders. I have always known that I was taking a risk when lending via FS, but I always thought that the main risk was that the sale proceeds from a default would be insufficient to pay the accrued interest and that I would end up having made an investment and received no return. I knew there also was a risk of losing capital, but I thought that risk was small, and that any capital loss would be minimal. This incident show that my thinking was wrong and that large capital losses are very possible, though I suppose the MJ memorabilia loans should have alerted me to this possibility. The most capital lost by an individual lender is £23.27. So I don't think that will stop lenders investing in FS. What I find strange is that these were very normal looking modern diamond engagement and eternity rings, made from 18ct white gold. The sort of item that any jeweller would be able to value very easily. Yes, I agree, the overall return we have is still excellent. In this case, it's what you say that has made me wonder how this valuation can have been so far out.
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bugs4me
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Post by bugs4me on Feb 16, 2015 18:08:30 GMT
The most capital lost by an individual lender is £23.27. So I don't think that will stop lenders investing in FS. What I find strange is that these were very normal looking modern diamond engagement and eternity rings, made from 18ct white gold. The sort of item that any jeweller would be able to value very easily. Yes, I agree, the overall return we have is still excellent. In this case, it's what you say that has made me wonder how this valuation can have been so far out. The valuation question IIRC has been raised more than once in the past and in this case it is fortunate as sqh has pointed the loss is relatively small. So lenders will still lend especially as it is only a few that were affected. But as the valuation was so far out and there have been - and are still to be - many higher value items listed then if this situation occurred in at least a couple of the higher value loans then I think it may have a serious impact on FS. Unfortunately, the valuation PDF statement (if one did exist) is no longer available.
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It won't have done them any harm, but I avoided it because I like FS and didn't want to kick them too hard when they were down 
