Clarity on legal charges

PBL 4a & b also have issues as stated LTV doesnt take into account that the security applies to both loans,I believe

Joint 1st charge. Effectively 2 tranches of same loan but loan info on site is misleading as 4a still shows original details & 4b shows security which includes property that 4a is secured on. 4b docs give actual LTV across both loans

solicitorious:  I look forward to seeing that.  It will be a useful tool.

Did you ever receive clarity from savingstream regarding whether there were any prior charges on the PBL022 and PBL023 properties?  If not, try raising the question via a direct email, as they're usuallly better at responding to direct questions than to issues raised on the forum.

Speaking of which, I don't believe they've ever acknowledged the need to update the 'Stress Test' results at the bottom of their Provision Fund page whenever the amount in the PF changes or if they make a new 'largest' loan.  Perhaps they need to be poked about that as well.  (Which I've now done.)

Please apply Fight Club rules 

I was only vaguely familiar with the terms until someone on another thread explained them to me.

As I understand it, they essentially answer the question:

To what proportion of its initial value would the underlying security have to fall to, for you to be left with x% of your investment? Costs of administration and sale of the asset are factored in. LTV90, for example, is the figure to be left with 90% [i.e. to lose 10%]. LTV50 would equate to losing half, and LTV0 would equate to losing everything...

Sometimes the answers are not intuitively obvious, especially in the case of 2nd Charges, or a combination of different charges.

Example:

Suppose you saw two property loans of £700k both with the same headline LTVs of 70%...

However, after drilling down into the detail of the actual security, you discover that Loan A was secured by a £700k 1st Charge on a £1m property, while loan B was secured by a 2nd Charge of £1.3m on £2m property that had a prior (1st Charge) of £700k. Which is the safer bet?

Let's do the numbers.

Loan A
LTV90: 63%
LTV50: 35%
LTV0: 0%


Loan B
LTV90: 66.5%
LTV50: 52.5%
LTV0: 35%

So, which is the riskier? Pretty obviously Loan B, because the relevant thresholds for loss are higher than for Loan A. In other words the value of the security would not have to fall as much, for you to sustain the same loss. Note also that a total loss is impossible with Loan A, whereas it is possible (although perhaps unlikely) with Loan B.

One may decide that the differences between these particular loans are not terribly much to worry about. However... these are mild examples, and it is not until you perform the calculations that you can know for certain what the figures are. You may discover something much scarier, such as a LTV0 of 64%, or something...

Of course, these numbers are just one aspect of risk. Loan A, despite looking safer, might in fact be 100 times more likely to fail than Loan B, and its security more likely to fall through the various LTV thresholds. Such analysis is beyond the scope of this discussion.

But it would seem prudent to have these numbers at one's disposal when evaluating the overall risks of lending.

I suspect the reason for such surprise is probably that many people do not realise the huge difference in sale results between a patient seller who waits for the right buyer to come along and an impatient seller -- a receiver or administrator, perhaps -- who just wants to sell the property and wrap up the job so that they can move on to the next job, and probably will sell to the first person who comes along and expresses any interest in the property at all.