registerme
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Post by registerme on Aug 3, 2015 13:16:05 GMT
I think we all accept that there being some defaults is in the nature of p2p consumer to business lending. One thing that is beginning to frustrate me with the FC platform is that whilst, presumably, reasons for default feed back into their risk model we, the lenders, have little in the way of ability to learn from them, adjust our own approach to lending as a result.
If we're to "beat the market" (or simply beat a fully diversified autobid return) we need to be able to minimise losses as well as maximise rate.
Just buy property and flip, or hold for x months depending on risk band and then get rid of on the SM, feel fairly blunt to me. I want to be able to look at the reasons for default and then go back to the original loan application to see if there is something I could have spotted, and then add this to my "beware" list.
Am I missing something? Am I talking nonsense? What do people think?
Cheers,
RM
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blender
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Post by blender on Aug 3, 2015 15:00:17 GMT
I think that you may be on unsafe ground in assuming that the reasons for individual defaults are used by FC to tune their banding model. The statistic of defaults, yes, but I doubt the individual loans contribute much to fine tuning. All businesses and their circumstances are different. There have been failures which have caused FC to fix holes through which the less scrupulous have crawled - but FC is always looking to cost-reduce the process consistent with achieving the losses for the band. Perhaps they keep score of particular types of failure mode, but if they did they would not be sharing it.
You miss the practice of selling any loan which has come back from a late payment. That is going to give a significant improvement in losses, and is something we can do easily. That and selling short acknowledges the fact that any due diligence is soon outdated.
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registerme
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Post by registerme on Aug 3, 2015 15:13:58 GMT
Thanks blender, and you're right, I may well be on unsafe ground re how they adjust their risk model. Also, yes, I mistakenly left out selling "lates".
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fasty
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Post by fasty on Aug 3, 2015 15:48:29 GMT
"Late" ? My alarm bells start ringing when I see "processing" with "RETRY" status.
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blender
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Post by blender on Aug 3, 2015 15:58:58 GMT
"Late" ? My alarm bells start ringing when I see "processing" with "RETRY" status. Yes, even if FC hold the interest money.
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Post by ratrace on Aug 3, 2015 16:28:45 GMT
One way l will be looking to reduce risk on new loans is holding on to them for 3-5 months then selling them. Then after they have made at least 21 repayments l will be looking to buy back loan parts on the SM, on any of the companies that am still keen on holding on to until the end of the loan term.
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registerme
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Post by registerme on Aug 3, 2015 16:36:25 GMT
"Late" ? My alarm bells start ringing when I see "processing" with "RETRY" status. But there's nothing you can do with a loan part that has a status of either late, retry or processing, other than note it down and look to sell if and when it makes its payment.
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ahowlin
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Post by ahowlin on Aug 3, 2015 18:18:29 GMT
I have seen 11 defaults in circa 820 loans over a period of time. Of these there seems to be reasonable prospects of getting my money back on half the defaults; so even the defaults are not all bad. There are various strategies I have evolved to minimise default exposure. I can't be sure they are all effective but here they are for what it's worth.
1. Sell if a company has late payments and a very good reason is not supplied. Sometimes the first payment is late but this is more likely to be a one-off administrative issue. Sometimes many payments are reported late around bank holidays but I think this is a weakness in FC's processing/reporting. Anything outside of that I sell when possible.
2. I don't bid for companies that come back for another loan very soon after an initial loan. Indeed I sell the original loan part.
3. I have noticed that many of the defaulting companies had rock bottom credit ratings. So in general I will not bid on loans where the company has rock bottom ratings no matter what FC have categorized the risk band. I suspect the ratings FC use are more about the assets of the company/person lending rather than the probability of the loan running to completion cleanly.
4. I don't buy loans on the secondary markets anymore - most of the defaults I have seen have been loans bought on the SM. Also don't use Autobid ever!
5. Apart from that obvious considerations are; can they afford the loan, have they taken on a lot of debt recently, and avoid bidding where the company is selective about the questions they answer.
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fasty
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Post by fasty on Aug 3, 2015 19:08:31 GMT
"Late" ? My alarm bells start ringing when I see "processing" with "RETRY" status. But there's nothing you can do with a loan part that has a status of either late, retry or processing, other than note it down and look to sell if and when it makes its payment. No, that's true, but the majority that have been in RETRY do make payment eventually. I take a regular look at My Loan Parts Late/Processing dropdown menu, sorted by Status, to gather together all the ones processing. I check all of those to see if they have RETRY. I have a separate FC-action-list where I note all the ones that experience RETRY or LATE without good reason like the usual bank holiday incompetence. Ex-retries receive my own elevated risk rating and are usually sold on.
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Post by captainconfident on Aug 3, 2015 19:16:45 GMT
But there's nothing you can do with a loan part that has a status of either late, retry or processing, other than note it down and look to sell if and when it makes its payment. No, that's true, but the majority that have been in RETRY do make payment eventually. I take a regular look at My Loan Parts Late/Processing dropdown menu, sorted by Status, to gather together all the ones processing. I check all of those to see if they have RETRY. I have a separate FC-action-list where I note all the ones that experience RETRY or LATE without good reason like the usual bank holiday incompetence. Ex-retries receive my own elevated risk rating and are usually sold on.
Having just posted on the subject of the simplicity of Mintos, its replies like this, fasty, that remind me why I'm gradually working my way out of FC. You could read a book or build a boat instead. Or get a job!
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jonah
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Post by jonah on Aug 3, 2015 19:26:19 GMT
FC is definitely not at the 'simple' end of the market!
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fasty
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Post by fasty on Aug 3, 2015 19:40:01 GMT
Actually, I believe that FC can be as simple or complicated as you want it to be. At the ultra-simple end you could simply use autobid and make a tolerable return with no effort at all. At the other extreme you could spend ages researching each potential loan candidate, which many people do.
My selection process is simple and rule-based so it doesn't take long to do. Same thing deciding which ones to flog. And the return is much better than using autobid.
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blender
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Post by blender on Aug 3, 2015 20:34:47 GMT
...
My selection process is simple and rule-based so it doesn't take long to do. Same thing deciding which ones to flog. And the return is much better than using autobid.
I think that both Jonah and Fasty are right. My process is similar to Fasty's. I do very little due diligence and do not have many loans. But the point is not just how much time it takes to manage an account for good returns, it is also important to consider how much skill and learning is involved in getting to the point where you can do it. The apprenticeship is challenging and only for the slightly mad.
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Post by GSV3MIaC on Aug 3, 2015 20:37:59 GMT
And whether you enjoy it .. if you don't enjoy it, put your money into Ratesetter (or other platform of your choice) and do something you DO enjoy.
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Post by ratrace on Aug 3, 2015 21:51:17 GMT
To my mind playing it "ultra safe" on FC is a wasted opportunity.lf that's what you have in mind then l feel Ratesetter /Zopa are a better road to go down.
What appeals to me about FC is that l see it is as a lower risk route then investing on AIM to taping into the growth that "Micro caps" can offer. So l understand that l must be willing to take on some risk in order to get a higher return.Which is why l tend to invest in the C D and E risk bands.
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