blender
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Post by blender on Jun 7, 2015 7:39:39 GMT
I'd prefer it if Funding Circle did what FundingKnight does and split its property loans into a different grading system from its other business loans. The recovery rates from these asset backed property loans ought to be reported on their own too. When it eventually emerges it is going to be fascinating. My guess is that FC wished to trial the property loans with minimal change to the platform and to use Autobid money without further authority from lenders. Therefore they would have to fit with the existing banding and diversity rules, rather than optimise funding arrangements for a new class. It may be that there will be Further Change which will allow these secured loans to escape the existing Autobid limitations.
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upland
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Post by upland on Jun 7, 2015 18:39:19 GMT
The recovery rates from these asset backed property loans ought to be reported on their own too. When it eventually emerges it is going to be fascinating. My guess is that FC wished to trial the property loans with minimal change to the platform and to use Autobid money without further authority from lenders. Therefore they would have to fit with the existing banding and diversity rules, rather than optimise funding arrangements for a new class. It may be that there will be Further Change which will allow these secured loans to escape the existing Autobid limitations. You could be right. One of my observations is how little the FC platform has changed over the years , its much the same when I joined and they had a £30M loanbook. I think that it is a very active website and the consequence of a bad change would be awful. So only very safe structural improvement.....
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dorset
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Post by dorset on Jun 7, 2015 19:12:55 GMT
We are approaching a moment of truth with the FC property loans when we will discover, as they fall due over the coming months, how solid they really are. I’ve five loans “in default” with AC earning 18% (theoretically) default interest. I’ve investments in over 50 property loans with FC. I’m not sure if there is a default interest rate if they become overdue (should have checked this out)? Hence my decision to keep away from any rate that is a straight 8% with no cash back. This currently seems far too low given the lack of performance evidence that we currently have.
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adrianc
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Post by adrianc on Jun 7, 2015 20:09:52 GMT
I’m not sure if there is a default interest rate if they become overdue (should have checked this out)? We can only go by Harrogate - paying the same rate as normal for the time it's overdue. 66 days, today, with the plumbing allegedly plugged in this last Thursday, so repayment should be very soon now...
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fasty
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Post by fasty on Jun 7, 2015 21:44:47 GMT
I’m not sure if there is a default interest rate if they become overdue (should have checked this out)? We can only go by Harrogate - paying the same rate as normal for the time it's overdue. 66 days, today, with the plumbing allegedly plugged in this last Thursday, so repayment should be very soon now... So, if the rate continues the same, does that imply that there is actually no incentive for the borrower to repay on time?
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adrianc
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Post by adrianc on Jun 7, 2015 21:49:10 GMT
Ah, now that's a different question. It's overdue, so the usual late hikes would apply to the borrower, I'd presume. 15% of the overdue amount immediately it's flagged as late, isn't it?
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blender
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Post by blender on Jun 7, 2015 21:51:15 GMT
Additional interest eats away at the profit from the development project. But also they presumably have to pay it, while during the normal term they did not - since FC collects the interest from us and pays it back in monthly instalments.
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maxmarengo
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Post by maxmarengo on Jun 8, 2015 8:09:04 GMT
My latest rough calc on the bad debt impacts:
Risk Category FC Expected My Est
A+ 0.6% 0.2%
A 1.5% 1.5%
B 2.3% 2.3%
C 3.3% 2.7%
C- 5.0% 3.4%
So the risk cats are in the correct order at least!
NB: based on a quick and dirty calc, taking account of the age of the loan book by category and recoveries to date.
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upland
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Post by upland on Jun 9, 2015 5:53:36 GMT
I am not familiar with the Harrogate loan , I take it that it was one of the very early property loans ? I dont know much about how the industry works but its fascinating learning. I cannot imagine that FC would be happy about one of the early ones ending badly.
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adrianc
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Post by adrianc on Jun 9, 2015 7:21:40 GMT
I am not familiar with the Harrogate loan , I take it that it was one of the very early property loans ? Launched last summer/autumn, two initial tranches, just shy of £1/2m total. Should have all completed and settled this April, but there were some delays to the project from early on (strip-out delayed because of planning woes), and a third tranche (£100k) as a result. The last one - plugging the water in - was due last weekend, and we're assured completion is imminent now, with repayment hot on the heels. There were various Fatuous Complications in organising paying the extra interest, but it did happen - and should now give them the mechanism to do so for any others.
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blender
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Post by blender on Jun 9, 2015 8:15:39 GMT
Yes, nothing ended badly, there were just unforeseen delays and not enough slack in the term. A learning exercise for FC. These loans for projects are different from normal business loans in that they are paid off when the properties are completed and sold. There has to be some approximation in the dates and sufficient slack is left in the term to cover most. But some will slip past the end date for the term, inevitably. This is not really failure.
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Post by GSV3MIaC on Jun 9, 2015 17:35:01 GMT
The failure is in not having thought through, and signed the borrower up for, an AC type contingency / overrun plan. Merely turning the loan into RBR and letting folks guess what interest rate might apply, doesn't really cut it as a general strategy.
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blender
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Post by blender on Jun 9, 2015 19:21:54 GMT
The failure is in not having thought through, and signed the borrower up for, an AC type contingency / overrun plan. Merely turning the loan into RBR and letting folks guess what interest rate might apply, doesn't really cut it as a general strategy. Of course you are right about that, and the problems come from bolting property loans onto the existing platform. But I consider that failure of the loan would involve loss, and even then it could fully recover. FC failures a different matter.
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