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Post by chris on Mar 18, 2015 13:18:55 GMT
I think the problem is that the system sets an "investment paused" flag and disables buying and selling. If the system set a "late payment" flag and continued to allow buying and selling there shouldn't be a problem. After 3 days late the system prints a letter which is sent to the borrower warning that default interest applies if payment is not made within 7 days. After 10 days the system sets a "default interest due to late payment" flag. Some lenders would be keen to buy units with the prospect of default interest, others would sell. Personally, I was very happy that loan #46 had a payment problem last week. I have been trying to buy units for months and last week I got a decent chunk. A late payment flag doesn't help those who do not check their accounts every day (or multiple times per day) and have historically set targets. If everyone dumps the loan at the first sign of a late payment, for whatever reason, then those lenders who aren't able to be as active lose out. That was the thinking behind the old system but it's been flawed in implementation due to the manual nature of the process. My personal preference is to automate repayments via standing order, DD, debit card, or whatever with a due date and an expected date. For standing order they'd be the same, for DD there'd be a 5 day window, etc. On the expected date the aftermarket should be locked without the warning being displayed but immediately opened again once the payment is processed. If payment isn't received at all on the expected date then it's flagged as a late payment, the aftermarket remains closed, and automated messages go out to the administration staff and the borrower. Presuming no exceptional circumstances which would trigger a switch to a fully manual process, the system would then reset as and when funds are received and can be automatically distributed to the lenders. That's going to take us a couple of months to implement in full but hopefully we'll be taking steps towards this in the next couple of weeks as we get automated access to the bank account. I'll also have to agree the exact procedure with the rest of the business so for now that's just my idea of how it should work and it's still fully open for debate.
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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 Mar 18, 2015 14:24:42 GMT
I think the problem is that the system sets an "investment paused" flag and disables buying and selling. If the system set a "late payment" flag and continued to allow buying and selling there shouldn't be a problem. After 3 days late the system prints a letter which is sent to the borrower warning that default interest applies if payment is not made within 7 days. After 10 days the system sets a "default interest due to late payment" flag. Some lenders would be keen to buy units with the prospect of default interest, others would sell. Personally, I was very happy that loan #46 had a payment problem last week. I have been trying to buy units for months and last week I got a decent chunk. A late payment flag doesn't help those who do not check their accounts every day (or multiple times per day) and have historically set targets. If everyone dumps the loan at the first sign of a late payment, for whatever reason, then those lenders who aren't able to be as active lose out. That was the thinking behind the old system but it's been flawed in implementation due to the manual nature of the process. My personal preference is to automate repayments via standing order, DD, debit card, or whatever with a due date and an expected date. For standing order they'd be the same, for DD there'd be a 5 day window, etc. On the expected date the aftermarket should be locked without the warning being displayed but immediately opened again once the payment is processed. If payment isn't received at all on the expected date then it's flagged as a late payment, the aftermarket remains closed, and automated messages go out to the administration staff and the borrower. Presuming no exceptional circumstances which would trigger a switch to a fully manual process, the system would then reset as and when funds are received and can be automatically distributed to the lenders. That's going to take us a couple of months to implement in full but hopefully we'll be taking steps towards this in the next couple of weeks as we get automated access to the bank account. I'll also have to agree the exact procedure with the rest of the business so for now that's just my idea of how it should work and it's still fully open for debate. I think AC are trying too hard to protect lenders. This is asset backed lending, lenders who put all their loan parts up for sale, the moment a payment is late shouldn't be investing in the first place. Next, we will have lenders who put their loan parts up for sale just before a payment is due, just in case it is late. Actually, I think this mentality already exists and needs to be reformed. Let me explain. There is no risk to lenders if the loan payments are retained from day one. Many bridging loans pay 12% for 6 months with up front interest retained by AC. Some lenders buy the units on day one and sell them in the 5th or 6th month, knowing that they have little or no risk. I think these loans should offer a lower rate in month one and ramp up gradually to reflect the risk. Say 6%,7%,8%,9%,10%,12% on a monthly basis. In this example there is small surplus, that would be paid as a bonus to those who hold the loan at final repayment.
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Post by chris on Mar 18, 2015 14:40:23 GMT
A late payment flag doesn't help those who do not check their accounts every day (or multiple times per day) and have historically set targets. If everyone dumps the loan at the first sign of a late payment, for whatever reason, then those lenders who aren't able to be as active lose out. That was the thinking behind the old system but it's been flawed in implementation due to the manual nature of the process. My personal preference is to automate repayments via standing order, DD, debit card, or whatever with a due date and an expected date. For standing order they'd be the same, for DD there'd be a 5 day window, etc. On the expected date the aftermarket should be locked without the warning being displayed but immediately opened again once the payment is processed. If payment isn't received at all on the expected date then it's flagged as a late payment, the aftermarket remains closed, and automated messages go out to the administration staff and the borrower. Presuming no exceptional circumstances which would trigger a switch to a fully manual process, the system would then reset as and when funds are received and can be automatically distributed to the lenders. That's going to take us a couple of months to implement in full but hopefully we'll be taking steps towards this in the next couple of weeks as we get automated access to the bank account. I'll also have to agree the exact procedure with the rest of the business so for now that's just my idea of how it should work and it's still fully open for debate. I think AC are trying too hard to protect lenders. This is asset backed lending, lenders who put all their loan parts up for sale, the moment a payment is late shouldn't be investing in the first place. Next, we will have lenders who put their loan parts up for sale just before a payment is due, just in case it is late. Actually, I think this mentality already exists and needs to be reformed. Let me explain. There is no risk to lenders if the loan payments are retained from day one. Many bridging loans pay 12% for 6 months with up front interest retained by AC. Some lenders buy the units on day one and sell them in the 5th or 6th month, knowing that they have little or no risk. I think these loans should offer a lower rate in month one and ramp up gradually to reflect the risk. Say 6%,7%,8%,9%,10%,12% on a monthly basis. In this example there is small surplus, that would be paid as a bonus to those who hold the loan at final repayment. For me it's more about trying to maintain a level playing field, at least where practical, whether you're time rich or time poor, HNW or small investor, institution or private individual, automated investor or manual investor, etc. Not so much in the sense that different investment strategies can't be employed in order to maximise return, minimise risk, or whatever it is you're personally targeting, more in the sense that I don't want the rules of the site to allow one group of lenders to exploit another. You see this on other platforms where those with the resources and inclination manipulate markets and take advantage of those reliant on the basic automation tools provided. I'm not under any illusion that we can create a perfect system but I'd like to at least try and minimise any skews in the market. I personally completely agree with you regarding what you say on risk but not everyone will. There'll be some that want to dump loan units at the first sign of trouble, regardless of the reasons, and I'd rather not give them the mechanism to do so at the expense of those lenders who want to set a target and leave it. They shouldn't have to log in around payment time in order to disable those targets if they don't want to buy into those loans if there's any uncertainty over a given payment.
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pikestaff
Member of DD Central
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Post by pikestaff on Mar 18, 2015 14:45:08 GMT
A late payment flag doesn't help those who do not check their accounts every day (or multiple times per day) and have historically set targets. If everyone dumps the loan at the first sign of a late payment, for whatever reason, then those lenders who aren't able to be as active lose out. That was the thinking behind the old system but it's been flawed in implementation due to the manual nature of the process. My personal preference is to automate repayments via standing order, DD, debit card, or whatever with a due date and an expected date. For standing order they'd be the same, for DD there'd be a 5 day window, etc. On the expected date the aftermarket should be locked without the warning being displayed but immediately opened again once the payment is processed. If payment isn't received at all on the expected date then it's flagged as a late payment, the aftermarket remains closed, and automated messages go out to the administration staff and the borrower. Presuming no exceptional circumstances which would trigger a switch to a fully manual process, the system would then reset as and when funds are received and can be automatically distributed to the lenders. That's going to take us a couple of months to implement in full but hopefully we'll be taking steps towards this in the next couple of weeks as we get automated access to the bank account. I'll also have to agree the exact procedure with the rest of the business so for now that's just my idea of how it should work and it's still fully open for debate. I think AC are trying too hard to protect lenders. This is asset backed lending, lenders who put all their loan parts up for sale, the moment a payment is late shouldn't be investing in the first place. ... The "lenders who put all their loan parts up for sale, the moment a payment is late" do not need protecting, but the people who buy from them do. AC runs significant reputational risk if it does not lock down a loan with late payments, and the loan turns out to be bad. So loans should be locked down immediately a payment is late (but not before) and unlocked only when the default is cured. Edit: crossed with chris's post above.
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TFTO
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Post by TFTO on Mar 18, 2015 14:58:01 GMT
For me it's more about trying to maintain a level playing field, at least where practical, whether you're time rich or time poor, HNW or small investor, institution or private individual, automated investor or manual investor, etc. That's a bit rich since you took away access to the primary market for those of us who are not HNW enough to be "underwriters".
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Post by chris on Mar 18, 2015 15:36:19 GMT
For me it's more about trying to maintain a level playing field, at least where practical, whether you're time rich or time poor, HNW or small investor, institution or private individual, automated investor or manual investor, etc. That's a bit rich since you took away access to the primary market for those of us who are not HNW enough to be "underwriters". By most accounts the primary market wasn't working due to the long draw down times. We were having to underwrite all but the smallest of loans so we reformed the site to match what most of our lenders want and formalised that process. Underwriters aren't exploiting our other investors they are providing a service to them, as well as to the platform, in funding those deals, getting them to draw down, and having their cash tied up for that period. For some loan types, such as invoice discounting, there's such a small drawdown delay (typically a day or two at most) that we're likely to do away with underwriting on those loans and offer them straight to retail. For others where the loan sizes are too big or there will typically be 4 weeks between funding and drawdown then it makes sense to put those to the underwriters to fund first.
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Post by pepperpot on Mar 18, 2015 16:03:31 GMT
I think I should get a badge or something for this idea.  Have you seen the price of badges on here?? "What one thinks one deserves and what one actually gets can be wildly different things" my old man used to say, although he used slightly different terminology.
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sqh
Member of DD Central
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Post by sqh on Mar 18, 2015 16:23:05 GMT
I think AC are trying too hard to protect lenders. This is asset backed lending, lenders who put all their loan parts up for sale, the moment a payment is late shouldn't be investing in the first place. ... The "lenders who put all their loan parts up for sale, the moment a payment is late" do not need protecting, but the people who buy from them do. AC runs significant reputational risk if it does not lock down a loan with late payments, and the loan turns out to be bad. So loans should be locked down immediately a payment is late (but not before) and unlocked only when the default is cured. Edit: crossed with chris's post above. I fully accept that buyers need protecting because of the automatic buy mechanism. A manual override to allow buying could be a solution but I'm not in favour of added complexity. I think what may happen, is nervous lenders will set their manual target to sell when a late payment stops trading. Then, when the payment is made, those loan parts will be immediately sold to those who want them. I still like the idea of graduated loan rates for loans where interest is retained on day one. Not really relevant to this thread though.
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mikes1531
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Post by mikes1531 on Mar 18, 2015 16:44:07 GMT
There is no risk to lenders if the loan payments are retained from day one. There may be no risk of interest payments being missed, but the default risk still exists. It appears that SCP&M (#146) didn't have interest retained up front, but I really don't think it would have made much difference if it had.
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niceguy37
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Post by niceguy37 on Mar 18, 2015 17:01:07 GMT
There is no risk to lenders if the loan payments are retained from day one. There may be no risk of interest payments being missed, but the default risk still exists. It appears that SCP&M (#146) didn't have interest retained up front, but I really don't think it would have made much difference if it had. IIRC there were 6 months retained interest, leading me to carelessly park some cash there until something more worthwhile came up, and intending to sell up well before the 6 months were up.
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kermie
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Post by kermie on Mar 18, 2015 19:43:04 GMT
I have had more than my normal amount of idle cash in my AC account waiting to get soaked up over the past week - in preparation for a recent loan drawdown. During that time, I have certainly got the impression that some lenders are "nervous nellies" (some might argue, simply prudent - I don't mean to cause offence!)...e.g. with the new larger window of 3ish days grace before trading is ceased on a late loan, a lot of loan parts in a small number of hard-security, low LTV, 12% rate loans with hitherto good payment records could be picked up over the past week. These have previously been hard to come by. I'm thinking #36 (Cov** Comm**) specifically. So in that respect, I am quite grateful to our nervous/prudent lenders for helping liquidity! ;-) Further, some of the Q&A messages of late seem to suggest to me that some lenders have little patience, manners - or indeed, perhaps again they are inexperienced and maybe should not be lending...and this comes across as exasperation. Anyone who has previously worked in a retail type of customer-facing environment must have some sympathy with AC, here! :-D. Personally I can see (unfortunately) a time when AC will need to consider moderating the Q&A. That will be a sad day. The plumber may (?) have shaken-out the highly-risk-averse lenders who arguably should not be lending. That one hit me hard, and whilst it will cost me four figures, I am not about to make a song and dance about it - I knew I was taking a risk.
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ramblin rose
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Post by ramblin rose on Mar 18, 2015 19:51:09 GMT
I have had more than my normal amount of idle cash in my AC account waiting to get soaked up over the past week - in preparation for a recent loan drawdown. During that time, I have certainly got the impression that some lenders are "nervous nellies" (some might argue, simply prudent - I don't mean to cause offence!)...e.g. with the new larger window of 3ish days grace before trading is ceased on a late loan, a lot of loan parts in a small number of hard-security, low LTV, 12% rate loans with hitherto good payment records could be picked up over the past week. These have previously been hard to come by. I'm thinking #36 (Cov** Comm**) specifically. So in that respect, I am quite grateful to our nervous/prudent lenders for helping liquidity! ;-) Further, some of the Q&A messages of late seem to suggest to me that some lenders have little patience, manners - or indeed, perhaps again they are inexperienced and maybe should not be lending...and this comes across as exasperation. Anyone who has previously worked in a retail type of customer-facing environment must have some sympathy with AC, here! :-D. Personally I can see (unfortunately) a time when AC will need to consider moderating the Q&A. That will be a sad day. The plumber may (?) have shaken-out the highly-risk-averse lenders who arguably should not be lending. That one hit me hard, and whilst it will cost me four figures, I am not about to make a song and dance about it - I knew I was taking a risk. More SM activity might also be to do with it being the end of the tax year; companies will have tax to pay, ISA allowances need using up, and this year there might be AC share investments to pay for too 
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Post by pepperpot on Mar 18, 2015 20:00:01 GMT
I've also been tweaking a few loans that pay pre 5thApr into loans that pay post 6thApr, every little helps.
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kermie
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Post by kermie on Mar 18, 2015 20:55:20 GMT
ramblin rose and pepperpot pot are quite right - this could be end-of-year tax planning. But I did find the timing last week quite suspicious. Indeed, that should have occurred to me given I'll be doing some of that tax planning myself over the next week or two.
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mikes1531
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Post by mikes1531 on Mar 18, 2015 21:08:46 GMT
I knew I was taking a risk. I knew I was taking a risk, too. But I'm not sure I knew I was taking such a big risk. If I invest in a loan with an 80% LTV, I might think the downside recovery in the default case would be proceeds of 60-70% of the 'value' the LTV is based on. In that range, I'd expect to lose any accrued interest, plus 13-25% of my capital. In the case of SCP&M, AC's preliminary guesstimate of the loss is considerably more than that. I expect that's what has upset many lenders.
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