indy
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Post by indy on May 14, 2015 8:30:12 GMT
So a borrower pays 18% + 4% + 2% = 24%. It seems likely that anyone with a good credit history and a sound asset for security should be able to borrow more cheaply than that from traditional sources, so I guess we are lending to relatively high risk borrowers. The biggest problen I see with Saving Stream is the fact 'we' do not lend to the end borrower. 'We' lend to Lendy Ltd which is unsecured, they then lend our money to the end borrower. Some time ago Lendy was talking about setting up a trust of some sort to give us lenders more security in the event Lendy went down. As far as I know nothing has been done about this and it has all gone very quiet. Maybe savingstream could give us an update?
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bugs4me
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Post by bugs4me on May 14, 2015 8:37:44 GMT
So a borrower pays 18% + 4% + 2% = 24%. It seems likely that anyone with a good credit history and a sound asset for security should be able to borrow more cheaply than that from traditional sources, so I guess we are lending to relatively high risk borrowers. The biggest problen I see with Saving Stream is the fact 'we' do not lend to the end borrower. 'We' lend to Lendy Ltd which is unsecured, they then lend our money to the end borrower. Some time ago Lendy was talking about setting up a trust of some sort to give us lenders more security in the event Lendy went down. As far as I know nothing has been done about this and it has all gone very quiet. Maybe Saving Stream could give us an update? IIRC that was covered by the PF although how the 2% figure was arrived at seems to be a mystery. Also, again IIRC, there was a mention about ringfencing each loan but that failed to materialise. So the bottom line is you lend money to Lendy at 12% and they in turn use it to finance the loans. If anything (heaven forbid) happens to Lendy then that would no doubt have an impact on all loans irrespective as to the LTV. I've got my exposure to Lendy limited to my comfort level and I suspect there may be others that feel the same. At 12% though I accept there is obviously more risk than at say 5%. So far though so good with SS but it's not everyone's cup of tea.
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Post by chrisuk on May 14, 2015 9:47:30 GMT
'Do not invest more than you are prepared to lose' is a very wise quote I believe.
Do not let the 'FCA Regulated' lull you into a false sense of security either.
A while ago I was advised by a FCA Regulated Financial Adviser to invest £100,000 of my life savings into a bond that went bust a couple of years later. The bond was not covered by the FSCS and the FCA proved to be useless and washed their hands of the whole matter. The investors also discovered the FCA are above the law and cannot be prosecuted for any errors they make.
However, I will continue to invest with 'SavingStream' because, so far, I am satisfied. But I see it as a 'gamble' and will not invest too much of my spare cash.
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Post by mrclondon on May 14, 2015 10:18:25 GMT
A useful starting point is to assume you'll lose half of all interest earrned over a complete economic cycle if lending at 10-13% pa, so net of defaults somewhere around 5-7%. Supporting this estimate is FC's long run net of default return of just over 6%, and RS, Zopa & W&Co all with large provison funds returning 5 to 6% pa. You might do a bit better than 6%, but to assume you'll significantly beat the average return from p2p over the last ten years is probably rather foolhardy. Interesting. Are you talking secured or unsecured? With due dilgence or merely taking all loans offered and building up a 200 loan portfolio in an effort to minimise losses (as some platforms advise)? But were you to be correct then the implication is significant losses ahead for Saving Stream lenders. Both secured and unsecured. Several secured loans on ThinCats have had zero or close to zero recovery, and one Assetz Capital secured loan looks like only a minimal recovery will be achieved. With unsecured loans, the general approach is to have small stakes in a very large number of loans, whereas with secured loans the norm is to have large stakes in a relatively small pool of loans, and hence zero recovery on a secured loan can have a bigger impact on the overall portfolio. (And you may have missed a secured Funding Secure loan only achieved a 31% recovery recently, although the platform did cover the shortfall due to a mistake along the way on their part). Just to be clear, I'm talking about the p2p sector as a whole. Those that beat 6% as a long run average will likely have done due dilligence on both platforms and loans, and steered clear of those platforms and loans with a higher perceived risk of failure. (I'm only investing in 1 in 20 TC loans for example).
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oldgrumpy
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Post by oldgrumpy on May 14, 2015 10:25:04 GMT
I too have peaked with my lending on SS and will not add more until they change their model and confirm that we lend individually to each borrower rather than the whole lot to Lendy, making us vulnerable to the consequences of loss on loans in which we have decided not to participate.
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indy
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Post by indy on May 14, 2015 10:52:34 GMT
Just to be clear, I'm talking about the p2p sector as a whole. Those that beat 6% as a long run average will likely have done due dilligence on both platforms and loans, and steered clear of those platforms and loans with a higher perceived risk of failure. (I'm only investing in 1 in 20 TC loans for example). Can Saving Stream be classed as true P2P? I have also cut right down on TC loans some of the security is a bit spurious I just make up my monthly payments to the nearest £1k and re invest that. I diverted my spare cash towards SS but I am now at a stage where I do not wish to commit any further funds until the security is sorted out. I am looking forward to Ablrate's new platform to launch, it looks like true asset backed P2B lending.......I think my spare money will be heading in that direction.
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bugs4me
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Post by bugs4me on May 14, 2015 10:57:00 GMT
I too have peaked with my lending on SS and will not add more until they change their model and confirm that we lend individually to each borrower rather than the whole lot to Lendy, making us vulnerable to the consequences of loss on loans in which we have decided not to participate. - the point you state has been mentioned goodness knows how many times rather like the lack of a SM on another platform. But whilst folks are prepared to lend under the current arrangement then there's zero incentive for the platform(s) to alter the status quo. Supply and demand and the demand on a fair number of platforms certainly exceeds supply although I do question from time to time whether lenders are fully aware of the risks.
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Post by mrclondon on May 14, 2015 11:29:03 GMT
Just to be clear, I'm talking about the p2p sector as a whole. Those that beat 6% as a long run average will likely have done due dilligence on both platforms and loans, and steered clear of those platforms and loans with a higher perceived risk of failure. (I'm only investing in 1 in 20 TC loans for example). Can Saving Stream be classed as true P2P? I have also cut right down on TC loans some of the security is a bit spurious I just make up my monthly payments to the nearest £1k and re invest that. I diverted my spare cash towards SS but I am now at a stage where I do not wish to commit any further funds until the security is sorted out. I am looking forward to Ablrate's new platform to launch, it looks like true asset backed P2B lending.......I think my spare money will be heading in that direction. The consensus view is that SS is not true p2p, but that just means that as part of platform due dilligence, the calculation of losses on platform failure needs tweaking: Lets assume PBL 033 has its full £5m on risk, and subsequently the title to the land is found to be null and void hence our security is worthless leading to the collapse of lendy. And lets assume the administrator winds up the rest of the book OK. So funds for distribution to lenders: other loans £21,084,250 + provision fund £521,685 = £21,605,935 (vs loan book £26,084,250) which implies a dividend to lenders from administrators to lendy ltd of 83p in the pound before costs. So somewhere around a 20% capital loss for all lenders on the platform. Which is equivalent to 1 in 5 loans on a true p2p platform failing and having zero recovery ... a loan failure rate which I would suggest would lead to the failure of that platform in short order, and for loans with terms of 3 years plus there must be an increased risk of weaker recovery under admin windup of the loan book than the platform continuing its periodic monitoring of the book.
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Maestro
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Post by Maestro on May 14, 2015 11:42:54 GMT
Can Saving Stream be classed as true P2P? I have also cut right down on TC loans some of the security is a bit spurious I just make up my monthly payments to the nearest £1k and re invest that. I diverted my spare cash towards SS but I am now at a stage where I do not wish to commit any further funds until the security is sorted out. I am looking forward to Ablrate's new platform to launch, it looks like true asset backed P2B lending.......I think my spare money will be heading in that direction. The consensus view is that SS is not true p2p, but that just means that as part of platform due dilligence, the calculation of losses on platform failure needs tweaking: Lets assume PBL 033 has its full £5m on risk, and subsequently the title to the land is found to be null and void hence our security is worthless leading to the collapse of lendy. And lets assume the administrator winds up the rest of the book OK. So funds for distribution to lenders: other loans £21,084,250 + provision fund £521,685 = £21,605,935 (vs loan book £26,084,250) which implies a dividend to lenders from administrators to lendy ltd of 83p in the pound before costs. So somewhere around a 20% capital loss for all lenders on the platform. Which is equivalent to 1 in 5 loans on a true p2p platform failing and having zero recovery ... a loan failure rate which I would suggest would lead to the failure of that platform in short order, and for loans with terms of 3 years plus there must be an increased risk of weaker recovery under admin windup of the loan book than the platform continuing its periodic monitoring of the book. I agree with a lot of the sentiment being shared on this thread, and the fact that SS have been very quiet on this topic does not fill one with confidence.. but can someone enlighten me on how zero or partial recovery from PBL033 can lead to Lendy collapse? They should just pass all of the loss to the PBL033 lenders (minus anything that they are willing to take from provision fund). Is there anything in Terms & Conditions which can make them take this liability on their balance sheet?
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Post by mrclondon on May 14, 2015 11:51:50 GMT
I agree with a lot of the sentiment being shared on this thread, and the fact that SS have been very quiet on this topic does not fill one with confidence.. but can someone enlighten me on how zero or partial recovery from PBL033 can lead to Lendy collapse? They should just pass all of the loss to the PBL033 lenders (minus anything that they are willing to take from provision fund). Is there anything in Terms & Conditions which can make them take this liability on their balance sheet? I'm deliberately taking a worse case scenario. But surely a foul up of the magnitude of the legals on a £5m loan not being watertight, and no subsequent professional indeminty payout from the lawyer's insurers would lead to a total lack of confidence in SS/Lendy and them failing to fund any more new loans, and hence being unable to continue trading ?
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Maestro
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Post by Maestro on May 14, 2015 19:10:44 GMT
I agree with a lot of the sentiment being shared on this thread, and the fact that SS have been very quiet on this topic does not fill one with confidence.. but can someone enlighten me on how zero or partial recovery from PBL033 can lead to Lendy collapse? They should just pass all of the loss to the PBL033 lenders (minus anything that they are willing to take from provision fund). Is there anything in Terms & Conditions which can make them take this liability on their balance sheet? I'm deliberately taking a worse case scenario. But surely a foul up of the magnitude of the legals on a £5m loan not being watertight, and no subsequent professional indeminty payout from the lawyer's insurers would lead to a total lack of confidence in SS/Lendy and them failing to fund any more new loans, and hence being unable to continue trading ? That is certainly a plausible scenario, but in my opinion a very low probability one. Default/collapse of any platform is possible and cannot be ruled out and having a third party contracted to wind down existing loan book is very important. Much more likely is the possibility of individual SS loan defaults and minimal recovery, as a result of say macro events resulting in sudden tightening of lending conditions and lot of SS borrowers failing to get the necessary refinance (say sudden rise in long term bond yields, sharp fall in equity markets or widening of credit spreads, UK leaving EU etc). As someone who have lived through Irish property market collapse, and have seen prices of supposedly "prime" development land collapse by 60-70-80% I'd be more worried about some of the SS loans that are secured on land e.g. say PBL027. Security of 70% LTV land is no where near income producing 70% LTV residential property. I try to weight my portfolio according on my risk tolerance for underlying asset rather the size of individual loan and sometimes hope that riskier deals weren't so easily funded here. I cringe when I read comments asking a platform to increase the "deal flow" as they have some idle money in their account. This can undoubtedly result in lowering of credit standards. Anglo Republic by Simon Carswell is a must read for anyone lending on real estate. With regard to say SS sharing the pain of a particular default among all SS investors and not just lenders of that loan, I will not be willing to share this pain as SS Terms & Conditions make it clear that any post default recovery (after their 5% admin fee!) "will be repayable to the Investors (allocated in proportion to the loan amounts funded)". Even SS fees are paid before lenders interest payment. Section 5 and 12 of T&C are interesting. Not intending to sound alarmist, as I invest with SS (among others) and quite like the liquid secondary market here.
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Post by meledor on May 14, 2015 19:36:57 GMT
I'm deliberately taking a worse case scenario. But surely a foul up of the magnitude of the legals on a £5m loan not being watertight, and no subsequent professional indeminty payout from the lawyer's insurers would lead to a total lack of confidence in SS/Lendy and them failing to fund any more new loans, and hence being unable to continue trading ? That is certainly a plausible scenario, but in my opinion a very low probability one. Default/collapse of any platform is possible and cannot be ruled out and having a third party contracted to wind down existing loan book is very important. Much more likely is the possibility of individual SS loan defaults and minimal recovery, as a result of say macro events resulting in sudden tightening of lending conditions and lot of SS borrowers failing to get the necessary refinance (say sudden rise in long term bond yields, sharp fall in equity markets or widening of credit spreads, UK leaving EU etc). As someone who have lived through Irish property market collapse, and have seen prices of supposedly "prime" development land collapse by 60-70-80% I'd be more worried about some of the SS loans that are secured on land e.g. say PBL027. Security of 70% LTV land is no where near income producing 70% LTV residential property. I try to weight my portfolio according on my risk tolerance for underlying asset rather the size of individual loan and sometimes hope that riskier deals weren't so easily funded here. I cringe when I read comments asking a platform to increase the "deal flow" as they have some idle money in their account. This can undoubtedly result in lowering of credit standards. Anglo Republic by Simon Carswell is a must read for anyone lending on real estate. With regard to say SS sharing the pain of a particular default among all SS investors and not just lenders of that loan, I will not be willing to share this pain as SS Terms & Conditions make it clear that any post default recovery (after their 5% admin fee!) "will be repayable to the Investors (allocated in proportion to the loan amounts funded)". Even SS fees are paid before lenders interest payment. Section 5 and 12 of T&C are interesting. Not intending to sound alarmist, as I invest with SS (among others) and quite like the liquid secondary market here.
I appreciate the T&C specify how recoveries are paid out but of bigger concern is risks on the liability side - for instance possible liquidity problems or perhaps a dispute with underwriters. Does Lendy Ltd have borrowings/creditors other than through the Saving Stream platform? There is a lack of information here and we desperately need some accounts to properly assess credit risk.
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Maestro
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Post by Maestro on May 15, 2015 11:34:14 GMT
That is certainly a plausible scenario, but in my opinion a very low probability one. Default/collapse of any platform is possible and cannot be ruled out and having a third party contracted to wind down existing loan book is very important. Much more likely is the possibility of individual SS loan defaults and minimal recovery, as a result of say macro events resulting in sudden tightening of lending conditions and lot of SS borrowers failing to get the necessary refinance (say sudden rise in long term bond yields, sharp fall in equity markets or widening of credit spreads, UK leaving EU etc). As someone who have lived through Irish property market collapse, and have seen prices of supposedly "prime" development land collapse by 60-70-80% I'd be more worried about some of the SS loans that are secured on land e.g. say PBL027. Security of 70% LTV land is no where near income producing 70% LTV residential property. I try to weight my portfolio according on my risk tolerance for underlying asset rather the size of individual loan and sometimes hope that riskier deals weren't so easily funded here. I cringe when I read comments asking a platform to increase the "deal flow" as they have some idle money in their account. This can undoubtedly result in lowering of credit standards. Anglo Republic by Simon Carswell is a must read for anyone lending on real estate. With regard to say SS sharing the pain of a particular default among all SS investors and not just lenders of that loan, I will not be willing to share this pain as SS Terms & Conditions make it clear that any post default recovery (after their 5% admin fee!) "will be repayable to the Investors (allocated in proportion to the loan amounts funded)". Even SS fees are paid before lenders interest payment. Section 5 and 12 of T&C are interesting. Not intending to sound alarmist, as I invest with SS (among others) and quite like the liquid secondary market here.
I appreciate the T&C specify how recoveries are paid out but of bigger concern is risks on the liability side - for instance possible liquidity problems or perhaps a dispute with underwriters. Does Lendy Ltd have borrowings/creditors other than through the Saving Stream platform? There is a lack of information here and we desperately need some accounts to properly assess credit risk.
Agreed. I guess only real solution is having a trust structure which holds security over the loans. As we all know balance sheet is a snapshot on a particular day and things can change a lot during the span of a year. Plus we have seen entities that are more regulated than P2P platforms e.g. banks playing with their balance sheets a week before annual/semi-annual reports. Given that we have not see any progress or communication from SS on this front I wonder if this is something we can raise with FCA. Few of us writing to FCA should at least raise a few eyebrows..I am not very familiar with FCA requirements for P2P platforms.. Thoughts?
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Post by savingstream on May 15, 2015 11:51:24 GMT
For reference - Lendy Ltd does not have any creditors or debt other than to our SS investors as shown on the platform.
Re the "Trust" structure. Clarke Willmott are currently reviewing our T & Cs in conjunction with Grant Thornton in readiness for implementation of the new structure. It is actually quite complicated to move from one existing model to another, hence the delay, but we are almost there.
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SteveT
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Post by SteveT on May 15, 2015 12:21:03 GMT
For reference - Lendy Ltd does not have any creditors or debt other than to our SS investors as shown on the platform. Re the "Trust" structure. Clarke Willmott are currently reviewing our T & Cs in conjunction with Grant Thornton in readiness for implementation of the new structure. It is actually quite complicated to move from one existing model to another, hence the delay, but we are almost there. Excellent news. I'm quite prepared to double or triple my current investment in SS as soon as the Trust structure is implemented.
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