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Post by andrewholgate on Jan 24, 2014 11:12:51 GMT
There has been a lot of discussion on drawdown timescales in recent weeks and it has become obvious that this is a major concern for our lenders. To that end I have been looking at why these have happened and taken steps to change our processes. One of the biggest problems is that we are at the mercy of third parties and taking tangible asset security can be a protracted process. If we were to revert to just a loan document and a personal guarantee, drawdown timescales would not be an issue, but we have stated clearly we will take tangible asset security on every loan.
As part of the due diligence process we undertake, we will now have all legal documentation agreed in principle by the borrower and their solicitor before an auction takes place. Once funding has been raised, the borrower will have 4 weeks in which to complete any remaining conditions precedent, such as obtaining the correct insurances, and signing the documentation so that we can drawdown. All loans should be drawn down within 4 weeks of auction close. This will slow down the delivery of some of the loans to preview on the website and I do apologise for that. You will have seen we have delayed some auction start dates recently in order to minimise any impact of delayed drawdowns. I'm confident that the changes I have implemented will have a positive impact.
There are a number of loans still waiting on drawdown. I will comment on those in due course.
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bugs4me
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Post by bugs4me on Jan 24, 2014 11:22:27 GMT
There has been a lot of discussion on drawdown timescales in recent weeks and it has become obvious that this is a major concern for our lenders. To that end I have been looking at why these have happened and taken steps to change our processes. One of the biggest problems is that we are at the mercy of third parties and taking tangible asset security can be a protracted process. If we were to revert to just a loan document and a personal guarantee, drawdown timescales would not be an issue, but we have stated clearly we will take tangible asset security on every loan. As part of the due diligence process we undertake, we will now have all legal documentation agreed in principle by the borrower and their solicitor before an auction takes place. Once funding has been raised, the borrower will have 4 weeks in which to complete any remaining conditions precedent, such as obtaining the correct insurances, and signing the documentation so that we can drawdown. All loans should be drawn down within 4 weeks of auction close. This will slow down the delivery of some of the loans to preview on the website and I do apologise for that. You will have seen we have delayed some auction start dates recently in order to minimise any impact of delayed drawdowns. I'm confident that the changes I have implemented will have a positive impact. There are a number of loans still waiting on drawdown. I will comment on those in due course. I agree Andrew, this will have a positive impact. Whilst delaying auctions may on the surface not be seen as a 'good' step forward it is a far better scenario than simply watching that paint dry. I have one still in pending that is some 9-10 weeks since close of auction. Probably equates to closer to 11 weeks since I bid. The only saving grace is that the loan is for 5 years but nonetheless this will have an impact on returns. I'm sure others are in the same position so any action to minimise this will be 'gratefully received' as they say.
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j
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Post by j on Jan 24, 2014 11:29:27 GMT
There has been a lot of discussion on drawdown timescales in recent weeks and it has become obvious that this is a major concern for our lenders. To that end I have been looking at why these have happened and taken steps to change our processes. One of the biggest problems is that we are at the mercy of third parties and taking tangible asset security can be a protracted process. If we were to revert to just a loan document and a personal guarantee, drawdown timescales would not be an issue, but we have stated clearly we will take tangible asset security on every loan. As part of the due diligence process we undertake, we will now have all legal documentation agreed in principle by the borrower and their solicitor before an auction takes place. Once funding has been raised, the borrower will have 4 weeks in which to complete any remaining conditions precedent, such as obtaining the correct insurances, and signing the documentation so that we can drawdown. All loans should be drawn down within 4 weeks of auction close. This will slow down the delivery of some of the loans to preview on the website and I do apologise for that. You will have seen we have delayed some auction start dates recently in order to minimise any impact of delayed drawdowns. I'm confident that the changes I have implemented will have a positive impact. There are a number of loans still waiting on drawdown. I will comment on those in due course. Not an issue for me. I'd rather have that 4 week period instigated & activated by AC, even if it means slower delivery of loans or return of monies bid if borrowers do not adhere to it. It might actually need one or two borrowers having their loans cancelled to show that AC & its members are not a soft touch. You have my support Andrew.
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Post by jevans4949 on Jan 24, 2014 11:44:27 GMT
This sounds good.
Assetz is probably now in a position where it can predict whether it will be able to fill a loan - possibly with the help of underwriters.
To assist in this, perhaps Assetz could introduce an "expession of interest" bid system for use whilst Assetz are processing the paperwork - like the pre-bid, but with no defined auction date.
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Post by chris on Jan 24, 2014 11:47:09 GMT
This sounds good. Assetz is probably now in a position where it can predict whether it will be able to fill a loan - possibly with the help of underwriters. To assist in this, perhaps Assetz could introduce an "expession of interest" bid system for use whilst Assetz are processing the paperwork - like the pre-bid, but with no defined auction date. This will be coming shortly, we're currently discussing the work flows to give lenders the appropriate notice of an auction starting, their pre-bids converting, etc.
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unmadem
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Post by unmadem on Jan 24, 2014 11:58:12 GMT
There has been a lot of discussion on drawdown timescales in recent weeks and it has become obvious that this is a major concern for our lenders. To that end I have been looking at why these have happened and taken steps to change our processes. One of the biggest problems is that we are at the mercy of third parties and taking tangible asset security can be a protracted process. If we were to revert to just a loan document and a personal guarantee, drawdown timescales would not be an issue, but we have stated clearly we will take tangible asset security on every loan. As part of the due diligence process we undertake, we will now have all legal documentation agreed in principle by the borrower and their solicitor before an auction takes place. Once funding has been raised, the borrower will have 4 weeks in which to complete any remaining conditions precedent, such as obtaining the correct insurances, and signing the documentation so that we can drawdown. All loans should be drawn down within 4 weeks of auction close. This will slow down the delivery of some of the loans to preview on the website and I do apologise for that. You will have seen we have delayed some auction start dates recently in order to minimise any impact of delayed drawdowns. I'm confident that the changes I have implemented will have a positive impact. There are a number of loans still waiting on drawdown. I will comment on those in due course. That seems good Andrew. Andrew since there is more preparation time behind the scenes AC does this mean AC will have the full credit report and valuation published a couple of days before an auction starts ?
If so that would be another big positive as there was not much time for due diligence on the last one. If AC values the crowd diligence ( which I believe they do) this would really help. How about publishing a policy on the minimum time the info is available before the auction (and possibly prebidding) starts.
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Post by mrclondon on Jan 24, 2014 13:42:16 GMT
That seems good Andrew. Andrew since there is more preparation time behind the scenes AC does this mean AC will have the full credit report and valuation published a couple of days before an auction starts ? If so that would be another big positive as there was not much time for due diligence on the last one. If AC values the crowd diligence ( which I believe they do) this would really help. How about publishing a policy on the minimum time the info is available before the auction (and possibly prebidding) starts. I definately agree. I also think that the requests for anonymity by the borrower should be challenged and not accepted unless a strong specific justification is made to AC. I can envisage some cases where commercial confidentiality could be required but re-developing a run down office block doesn't strike me as fitting that category. Crowd due dilligence should be facilitated as much as possible.
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j
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Post by j on Jan 24, 2014 14:45:42 GMT
This sounds good. Assetz is probably now in a position where it can predict whether it will be able to fill a loan - possibly with the help of underwriters. To assist in this, perhaps Assetz could introduce an "expession of interest" bid system for use whilst Assetz are processing the paperwork - like the pre-bid, but with no defined auction date. Nice idea!
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bugs4me
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Post by bugs4me on Jan 24, 2014 14:48:55 GMT
That seems good Andrew. Andrew since there is more preparation time behind the scenes AC does this mean AC will have the full credit report and valuation published a couple of days before an auction starts ? If so that would be another big positive as there was not much time for due diligence on the last one. If AC values the crowd diligence ( which I believe they do) this would really help. How about publishing a policy on the minimum time the info is available before the auction (and possibly prebidding) starts. I definately agree. I also think that the requests for anonymity by the borrower should be challenged and not accepted unless a strong specific justification is made to AC. I can envisage some cases where commercial confidentiality could be required but re-developing a run down office block doesn't strike me as fitting that category. Crowd due dilligence should be facilitated as much as possible. I can understand the need in many cases for anonymity. There are so many newer P2P/P2B companies springing up that I'm sure trying to 'poach' a client from another peer lender after they've done all the work - I wouldn't put it past them. Maybe the information could be made available to a select few outside of AC subject to a NDA being in place. Not sure if this would work or just introduce another layer of paperwork. ATM, we have to take what is being proposed on the track record of AC which I'm comfortable with provided the LTV's remain sensible. This criteria I accept does not fit everyone's requirements though.
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Post by oldnick on Jan 25, 2014 10:26:26 GMT
There has been a lot of discussion on drawdown timescales in recent weeks and it has become obvious that this is a major concern for our lenders. To that end I have been looking at why these have happened and taken steps to change our processes. One of the biggest problems is that we are at the mercy of third parties and taking tangible asset security can be a protracted process. If we were to revert to just a loan document and a personal guarantee, drawdown timescales would not be an issue, but we have stated clearly we will take tangible asset security on every loan. As part of the due diligence process we undertake, we will now have all legal documentation agreed in principle by the borrower and their solicitor before an auction takes place. Once funding has been raised, the borrower will have 4 weeks in which to complete any remaining conditions precedent, such as obtaining the correct insurances, and signing the documentation so that we can drawdown. All loans should be drawn down within 4 weeks of auction close. This will slow down the delivery of some of the loans to preview on the website and I do apologise for that. You will have seen we have delayed some auction start dates recently in order to minimise any impact of delayed drawdowns. I'm confident that the changes I have implemented will have a positive impact. There are a number of loans still waiting on drawdown. I will comment on those in due course. That's good. I like the idea of a four week deadline for drawdowns, but how firmly will it/should it be enforced? It would be a shame to miss a good prospect because of events clearly beyond the control of the borrower, but also easy to get sucked into a series of plausible but spurious excuses. Basically I want my money to be working, so if the borrower is prepared to pay a weekly non-returnable reservation fee for continued access to the offered funds I for one can happily bear the delays. (Or is there a reason it cannot be so, either legally or simply because borrowers are unlikely to accept it?)
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pikestaff
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Post by pikestaff on Jan 25, 2014 11:21:33 GMT
Definitely a positive development. I have been having second thoughts about AC because of the slow drawdowns relative to TC but this should increase the share of my funds going to AC.
Re the comment about anonymity requests by borrowers, having their details made public is a disincentive to them if they have the option of going elsewhere. There is also no offsetting benefit to them if auctions are fixed rate (like almost all on AC) and will fill anyway. Unless the auction is for a large amount, or is floating rate, why should they agree to disclosure? I am surprised that so many do - especially when it leads to the kind of discussion on a public forum that we have seen for K*****minster. Too much of this will drive borrowers away. Remember, the borrowers are the real customers.
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mikes1531
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Post by mikes1531 on Jan 25, 2014 21:36:23 GMT
The only saving grace is that the loan is for 5 years but nonetheless this will have an impact on returns. This may be a mythical saving grace. IIRC, all or nearly all 5-year loans allow the borrower to repay them in advance at any time without penalty. The interest rate on an AC loan generally is at a relative high rate compared to what the borrower probably will be able to obtain a year or two later, once their business plan has been shown to be valid. As a result, the borrower has a big incentive to replace the AC loan with a lower-rate, 'conventional' loan as soon as they possibly can. I therefore do not expect many of the 5-year loans to last more than two years. I'm prepared to be wrong on this. And unless interest rates in general skyrocket in the next couple of years, I'll be grateful if a lot of these 5-year loans do run their whole term -- unless, of course, they aren't repaid in full at the end of the term! 
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Post by oldnick on Jan 25, 2014 23:20:50 GMT
The only saving grace is that the loan is for 5 years but nonetheless this will have an impact on returns. This may be a mythical saving grace. IIRC, all or nearly all 5-year loans allow the borrower to repay them in advance at any time without penalty. The interest rate on an AC loan generally is at a relative high rate compared to what the borrower probably will be able to obtain a year or two later, once their business plan has been shown to be valid. As a result, the borrower has a big incentive to replace the AC loan with a lower-rate, 'conventional' loan as soon as they possibly can. I therefore do not expect many of the 5-year loans to last more than two years. I'm prepared to be wrong on this. And unless interest rates in general skyrocket in the next couple of years, I'll be grateful if a lot of these 5-year loans do run their whole term -- unless, of course, they aren't repaid in full at the end of the term! On the gloomy side, the only loans that go the full 5 years may be to borrowers who can't negotiate a better deal - either because their prospects aren't good enough, or because interest rates have risen to the point that it's not worth the trouble - in which case we'll wish our money had been returned early so we can take advantage of presumably even better rates then on offer at AC.
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mikes1531
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Post by mikes1531 on Jan 25, 2014 23:34:58 GMT
On the gloomy side, the only loans that go the full 5 years may be to borrowers who can't negotiate a better deal - either because their prospects aren't good enough, or because interest rates have risen to the point that it's not worth the trouble - in which case we'll wish our money had been returned early so we can take advantage of presumably even better rates then on offer at AC. That's one of the problems of penalty-free overpayments. It's the best-quality borrowers that can and do take advantage of it which, it has been suggested, means that the average quality of a portfolio of loans decreases with time as the better quality loans are paid off first. And it also illustrated the one-sided nature of lending with that feature -- the borrower has the control over whether to continue the loan if it's advantageous to them and exit it if it isn't. The lender doesn't -- their most attractive loans can be paid off early, and the dogs carry on for the full term. This needn't be a problem as long as the interest rates charged reflect the risks of this.
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Post by oldnick on Feb 8, 2014 8:44:11 GMT
There has been a lot of discussion on drawdown timescales in recent weeks and it has become obvious that this is a major concern for our lenders. To that end I have been looking at why these have happened and taken steps to change our processes. One of the biggest problems is that we are at the mercy of third parties and taking tangible asset security can be a protracted process. If we were to revert to just a loan document and a personal guarantee, drawdown timescales would not be an issue, but we have stated clearly we will take tangible asset security on every loan. As part of the due diligence process we undertake, we will now have all legal documentation agreed in principle by the borrower and their solicitor before an auction takes place. Once funding has been raised, the borrower will have 4 weeks in which to complete any remaining conditions precedent, such as obtaining the correct insurances, and signing the documentation so that we can drawdown. All loans should be drawn down within 4 weeks of auction close. This will slow down the delivery of some of the loans to preview on the website and I do apologise for that. You will have seen we have delayed some auction start dates recently in order to minimise any impact of delayed drawdowns. I'm confident that the changes I have implemented will have a positive impact. There are a number of loans still waiting on drawdown. I will comment on those in due course. That's good. I like the idea of a four week deadline for drawdowns, but how firmly will it/should it be enforced? It would be a shame to miss a good prospect because of events clearly beyond the control of the borrower, but also easy to get sucked into a series of plausible but spurious excuses. Basically I want my money to be working, so if the borrower is prepared to pay a weekly non-returnable reservation fee for continued access to the offered funds I for one can happily bear the delays. (Or is there a reason it cannot be so, either legally or simply because borrowers are unlikely to accept it?) Andrew, I'd appreciate a comment from you about the final paragraph above - short loans periods and delayed drawdowns (innocent or calculated) make a nonsense of the advertized lending rate that we are supposed to base our lending decisions on. Have you considered my suggestion, and if so, what was your conclusion?
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