jonbvn
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Post by jonbvn on Feb 24, 2015 5:14:27 GMT
Right guys, I need a 500 page dissertation on the statistical analysis of this RS borrowing data (with graphs). Extra marks will be gained with estimates of future lending rates & defaults. Before 6am tomorrow please, before I go to work. Perhaps I can sack our data analytics and reporting employees, and crowd source all the work to lenders. More work, higher cash backs! A self contained eco system of lenders and borrowers with no staff or company! All very 1984/Animal Farm!
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Post by westonkevRS on Feb 24, 2015 13:09:14 GMT
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Post by westonkevRS on Feb 24, 2015 13:10:24 GMT
So Q: Who does Ratesetter really offer loans to? A: People who want to borrow. P.S. The office loves this post. Rhydian thinks davee39 deserves a medal!
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jonbvn
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Post by jonbvn on Feb 24, 2015 14:58:54 GMT
Managed to squeeze in some quick Excel over lunch to arrive at the following data: - £1.8M of live loans at an interest rate greater than 20%
- £58.3M of live loans at an interest rate less than 3%
- 1735 late loans with an average rate of 5.00%
- 830 defaulted loans with an average rate of 4.52%
- 19853 repaid loans with an average rate of 4.10%
- 65227 repaying loans with an average rate of 3.73%
- 87645 total loans with an average rate of 3.84%
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pip
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Post by pip on Feb 24, 2015 15:02:02 GMT
OK well here goes with my first by of analysis and questions: Over £100k loansThere have been 426 loans over £100k with a total amount lent in this category of £68m at the end of January 2015. These have increased significantly from 3 a quarter in Q2 2013 totaling £306,000 up to 122 in Q4 2014 totaling £20m. This in my opinion is primary driver of the increase of demand for loans. 333 of these loans were to businesses of which 260 were secured. Only 5 of these loans are 'late', with no defaulted, with a principle outstanding of £581k for late loans, representing just 0.8% of loans in this category. Interestingly 4 out of the 5 late loans are individual loans and none were secured. Questions
- How does an individual borrow over £100k, I thought this was outside Ratesetter's policy of only loans of a max of £25k to an individual? - Who are these businesses who are borrowing from Ratesetter at over £100k and who provide no security? How are these companies credit checked? - What is the LTV ratio on secured property, OK so no defaults so far great, but if we had a property crash with £68m in the over £100k category could leave lenders exposed if prices fell on low LTV's. - Unrelated topic, how does Ratesetter monitor the fraud risk of somebody within Ratesetter setting up a loan, moving the status to default (and internally writing off the loan without raising a CCJ) and then using the provision fund to cover the cost of the loan?
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c88dnf
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Post by c88dnf on Feb 24, 2015 16:20:50 GMT
Where is all the analysis and questions? I was expecting an avalanche! I guess some people just want to ask the question to know they can get an answer, and then are simply happy an answer exists. My guess is some people just like asking questions knowing full well that whatever answer is given, no matter how reasonable or commercially sensitive, they can express discontent and ask another set of questions.
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Post by westonkevRS on Feb 24, 2015 16:28:24 GMT
Answers (partly)
- How does an individual borrow over £100k, I thought this was outside Ratesetter's policy of only loans of a max of £25k to an individual?
A - This is only available via selected sources, and not to "normal" applications. These are individuals of exceptional professional status. They are also assessed completely differently, i.e. with a more detailed assessment of personal and business status. They are assessed by the Retail team and the Commercial team. Often they are well known to RateSetter personally from previous working careers and contacts.
- Who are these businesses who are borrowing from RateSetter at over £100k and who provide no security? How are these companies credit checked?
A - as the original blog indicated we have specialist Commercial Lending experts (I'm head of Retail Lending). These are checked on an individual basis and commercially, including the use of commercial credit checking bureau data providers (e.g. Graydon, D&B, and others). For large loans security is the norm, there are some exceptional circumstances where this is no required. It should be noted that even if the database doesn't say there is security in a traditional form (i.e. on property) there is other security forms taken just not marked on the database you're looking at, which I cannot go into detail on.
- What is the LTV ratio on secured property, OK so no defaults so far great, but if we had a property crash with £68m in the over £100k category could leave lenders exposed if prices fell on low LTV's.
A - This varies per loan deal; but the Commercial team are very prudent and are looking at very low LTVs. To my knowledge the highest is 70% LTV based on maximum policy decision, although I wouldn't want to guarantee the exact adherence to this policy
- Unrelated topic, how does RateSetter monitor the fraud risk of somebody within RateSetter setting up a loan, moving the status to default (and internally writing off the loan without raising a CCJ) and then using the provision fund to cover the cost of the loan?
A - Our fraud checks are very extensive and varied relying on advanced system and IT solutions and well as manual processes. We are members of CIFAS and use software solutions from two credit reference agencies and two specialist data analysis firms. Obviously I'm not going to go into detail as you never know who is reading this. However reviews by CIFAS, Equifax, institutional lenders, an individual contractor and the British Business Bank have been pleased - and in fact our precise losses are very low compared to bank benchmarks. We also work periodically with our favourite other P2P lender to mutually fight fraud.
I'm sorry if some of these answers are vague, but there are competitive issues as well as fraud insights not to be shared publicly.
Kevin.
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pip
Posts: 542
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Post by pip on Feb 24, 2015 16:45:09 GMT
Answers (partly)- How does an individual borrow over £100k, I thought this was outside Ratesetter's policy of only loans of a max of £25k to an individual? A - T his is only available via selected sources, and not to "normal" applications. These are individuals of exceptional professional status. They are also assessed completely differently, i.e. with a more detailed assessment of personal and business status. They are assessed by the Retail team and the Commercial team. Often they are well known to RateSetter personally from previous working careers and contacts.- Who are these businesses who are borrowing from RateSetter at over £100k and who provide no security? How are these companies credit checked? A - as the original blog indicated we have specialist Commercial Lending experts (I'm head of Retail Lending). These are checked on an individual basis and commercially, including the use of commercial credit checking bureau data providers (e.g. Graydon, D&B, and others). For large loans security is the norm, there are some exceptional circumstances where this is no required. It should be noted that even if the database doesn't say there is security in a traditional form (i.e. on property) there is other security forms taken just not marked on the database you're looking at, which I cannot go into detail on.- What is the LTV ratio on secured property, OK so no defaults so far great, but if we had a property crash with £68m in the over £100k category could leave lenders exposed if prices fell on low LTV's. A - T his varies per loan deal; but the Commercial team are very prudent and are looking at very low LTVs. To my knowledge the highest is 70% LTV based on maximum policy decision, although I wouldn't want to guarantee the exact adherence to this policy- Unrelated topic, how does RateSetter monitor the fraud risk of somebody within RateSetter setting up a loan, moving the status to default (and internally writing off the loan without raising a CCJ) and then using the provision fund to cover the cost of the loan? A - Our fraud checks are very extensive and varied relying on advanced system and IT solutions and well as manual processes. We are members of CIFAS and use software solutions from two credit reference agencies and two specialist data analysis firms. Obviously I'm not going to go into detail as you never know who is reading this. However reviews by CIFAS, Equifax, institutional lenders, an individual contractor and the British Business Bank have been pleased - and in fact our precise losses are very low compared to bank benchmarks. We also work periodically with our favourite other P2P lender to mutually fight fraud.I'm sorry if some of these answers are vague, but there are competitive issues as well as fraud insights not to be shared publicly. Kevin. Thanks your answers were great, don't be so modest! To be honest giving this information has given me a lot more confidence in the loanbook and makes me more willing to lend. Of course whenever you get under the bonnet there are always things that worked not quite as expected, but overall I think the loanbook is in good shape, based on my very limited analysis. I also applaud the transparency of this exercise. I am fully aware of the risks of giving out this info as you manipulate data to say pretty much whatever! Be interesting to hear more people's analysis of the data, mine was just on one type of loan, there is so much more out there, but really can't spend my entire life in pivot tables.
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Post by p2plender on Feb 24, 2015 17:16:56 GMT
How come FC didn't engage such methods when lending out my dosh to Tom Dick n Harry or did they...........
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agent69
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Post by agent69 on Feb 24, 2015 17:26:52 GMT
Answers (partly)- How does an individual borrow over £100k, I thought this was outside Ratesetter's policy of only loans of a max of £25k to an individual? A - Often they are well known to RateSetter personally from previous working careers and contacts. They all seemed decent chaps? Sounds like the Phillips Berenson scandal
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pip
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Post by pip on Feb 24, 2015 18:00:58 GMT
Answers (partly)- How does an individual borrow over £100k, I thought this was outside Ratesetter's policy of only loans of a max of £25k to an individual? A - Often they are well known to RateSetter personally from previous working careers and contacts. They all seemed decent chaps? Sounds like the Phillips Berenson scandal Ha, want to watch that episode now! You may have a point, but then again I hear all the time about those halcyon days when getting a mortgage was a case of playing golf with the bank manager to see if you were a 'decent chap'! I guess so long as they are putting their personal contacts through the same credit checks as other people rather than helping out an old friend with a nice low rate 5 year loan to get the bailiffs to remove the clamp from their Ferrari at the expense of other borrowers. There is one individual with a one year loan for £1.2m at 3.573%, hope this chap is a credit worthy bloke! Look let's face it even with this info, ratesetter rightly will never give us the details of all the people they lend money to. I guess what this info tells me is what I suspected all along, there is more going on with the loan book than simply people who log onto ratesetter.com and request a loan. They lend out the money to other people and companies too. For me this is actually fine, so long as the coverage ratio stays healthy. Of course there is a risk of the fraud of somebody within ratesetter lending money out to somebody they know wont pay back, pocketing the money and using the provision fund to pay off the lender. I guess that's why there is FCA regulation, although I know nothing is free from the risk of fraud and often regulators can provide false comfort. As the business evolves I am sure they will get into some areas where they go, OK that was a mistake as the defaults are too high, and they can change their lending. Of course as well the whole world could fall in and there be defaults across the board. Peer to peer has risks associated with it, and like with any lending you only see so much of the picture. Still I appreciate Ratesetter providing us with this data and giving honest answers to my pretty interrogating questions.
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ikorodu
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Post by ikorodu on Feb 24, 2015 18:03:58 GMT
Answers (partly)- How does an individual borrow over £100k, I thought this was outside Ratesetter's policy of only loans of a max of £25k to an individual? A - Often they are well known to RateSetter personally from previous working careers and contacts. They all seemed decent chaps? Sounds like the Phillips Berenson scandal I'm sure it's not, but it sounds like loans for the boys! Then it is said that it's not what you know but who you know. Especially when looking for a £100k loan!
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Post by westonkevRS on Feb 24, 2015 18:18:25 GMT
Answers (partly)- How does an individual borrow over £100k, I thought this was outside Ratesetter's policy of only loans of a max of £25k to an individual? A - Often they are well known to RateSetter personally from previous working careers and contacts. They all seemed decent chaps? Sounds like the Phillips Berenson scandal This comes across wrong, I write a little quickly without engaging my brain sometime. It means that we now have good working relationships with many people across professional sectors; who have by word of mouth have introduced us. It shouldn't have sounded like mates deals; which it certainly isn't - the pricing is competitive and it isn't in our interests to lend flippantly. I apologise for this "decent chaps" reference, as it's wrong. I meant to imply these loans are not given to random people off the street, it is to people with impeccable credit histories and professional statuses usually known to RateSetter via existing finance relationships or people we already work with. Kevin.
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ikorodu
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Post by ikorodu on Feb 24, 2015 18:24:11 GMT
They all seemed decent chaps? Sounds like the Phillips Berenson scandal Ha, want to watch that episode now! You may have a point, but then again I hear all the time about those halcyon days when getting a mortgage was a case of playing golf with the bank manager to see if you were a 'decent chap'! I guess so long as they are putting their personal contacts through the same credit checks as other people rather than helping out an old friend with a nice low rate 5 year loan to get the bailiffs to remove the clamp from their Ferrari at the expense of other borrowers. There is one individual with a one year loan for £1.2m at 3.573%, hope this chap is a credit worthy bloke! Look let's face it even with this info, ratesetter rightly will never give us the details of all the people they lend money to. I guess what this info tells me is what I suspected all along, there is more going on with the loan book than simply people who log onto ratesetter.com and request a loan. They lend out the money to other people and companies too. For me this is actually fine, so long as the coverage ratio stays healthy. Of course there is a risk of the fraud of somebody within ratesetter lending money out to somebody they know wont pay back, pocketing the money and using the provision fund to pay off the lender. I guess that's why there is FCA regulation, although I know nothing is free from the risk of fraud and often regulators can provide false comfort. As the business evolves I am sure they will get into some areas where they go, OK that was a mistake as the defaults are too high, and they can change their lending. Of course as well the whole world could fall in and there be defaults across the board. Peer to peer has risks associated with it, and like with any lending you only see so much of the picture. Still I appreciate Ratesetter providing us with this data and giving honest answers to my pretty interrogating questions. Have to say that I'm in broad agreement with what has been said above. There's always likely to have been more going on behind the scenes. I too am grateful for the interesting data release.
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Post by swfab on Feb 24, 2015 18:42:01 GMT
Answers (partly)- What is the LTV ratio on secured property, OK so no defaults so far great, but if we had a property crash with £68m in the over £100k category could leave lenders exposed if prices fell on low LTV's. A - T his varies per loan deal; but the Commercial team are very prudent and are looking at very low LTVs. To my knowledge the highest is 70% LTV based on maximum policy decision, although I wouldn't want to guarantee the exact adherence to this policy Thank you westonkevRS for all your answers to those questions. Could you also please let us know what the LTV is based on? The security would surely be a '2nd legal charge' (unless the loan is for a mortgage, where it would be a '1st legal charge'), which would imply that the LTV is based on the equity on the property? As well as getting the lowest LTV possible on that equity (if that is the case), where you mentioned a possible max of 70%, would the Commercial Lending team also work towards getting the lowest possible valuation (the lower end of the 'fair market value')? For a £1.2m secured loan, that would be an equity valued at about £1.7m (assuming 70% on market value - outstanding mortgage). Would such security then be on a commercial property that the borrower has a mortgage on? Or would that be a super wealthy person wanting a £1.2m loan for an extension to his already massive house ;-) ?
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