webwiz
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Post by webwiz on Oct 6, 2015 10:56:06 GMT
i know no one can guarantee the fund would make any payments otherwise it would be classified as insurance no doubt and you wouldn't want to be regulated for that! Not only the regulation burden, the PF would need to be much more than any platform could afford and still be competitive on interest rate.
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shimself
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Post by shimself on Oct 6, 2015 18:30:58 GMT
My version of wellesley (description written for OH)
lets say you put in 100 they will spread it around in sort of £10 lumps into 10ish of their current laons (which are 25k to 2M). Legally the borrower owes you so if wellesley goes bust your money is not lost wellesley also put some of their own money into each loan (10% I think?), so if it isnt repaid or (more likely) is only partly repaid they lose money, so they care. In fact if there is a shortfall their money goes first. In other words lets say they had to foreclose on a 100K bridging loan (on a property which would be valued at 150K or more ie 65% max LTV) if as is most likely the property sold for 140K, fine wellesley and you get paid in full and the borrower gets some of their own money back If it sold for 90K, the borrower gets nowt, wellesley gets nowt, you get all your money (all your £10) If it sold for 75K the borrower gets nowt, wellesley gets nowt, and you get 75/90ths ie you would lose £1-66 (note thats if BOTH the bridging laon wasnt paid off and if the property sold for half of what the surveyor said it was worth). But no even then you would get all your moeny back because they have a provisions fund.
You would only start losing money if lots of loans went wrong and property prices in general went down by >40%.
I suspect the platform risk is high in the narrow sense that if somebody fiddled all the money into their own account and shot off to South America I think we'd be screwed
Anybody please correct me.
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jonah
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Post by jonah on Oct 6, 2015 19:19:11 GMT
My version of wellesley (description written for OH) lets say you put in 100 they will spread it around in sort of £10 lumps into 10ish of their current laons (which are 25k to 2M). Legally the borrower owes you so if wellesley goes bust your money is not lost wellesley also put some of their own money into each loan (10% I think?), so if it isnt repaid or (more likely) is only partly repaid they lose money, so they care. In fact if there is a shortfall their money goes first. In other words lets say they had to foreclose on a 100K bridging loan (on a property which would be valued at 150K or more ie 65% max LTV) if as is most likely the property sold for 140K, fine wellesley and you get paid in full and the borrower gets some of their own money back If it sold for 90K, the borrower gets nowt, wellesley gets nowt, you get all your money (all your £10) If it sold for 75K the borrower gets nowt, wellesley gets nowt, and you get 75/90ths ie you would lose £1-66 (note thats if BOTH the bridging laon wasnt paid off and if the property sold for half of what the surveyor said it was worth). But no even then you would get all your moeny back because they have a provisions fund. You would only start losing money if lots of loans went wrong and property prices in general went down by >40%. I suspect the platform risk is high in the narrow sense that if somebody fiddled all the money into their own account and shot off to South America I think we'd be screwed Anybody please correct me. Surely in your example, the 1.66 loss would be (probably!) reduced somewhat by the PF?
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shimself
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Post by shimself on Oct 6, 2015 19:52:06 GMT
If it sold for 75K the borrower gets nowt, wellesley gets nowt, and you get 75/90ths ie you would lose £1-66 (note thats if BOTH the bridging laon wasnt paid off and if the property sold for half of what the surveyor said it was worth). But no even then you would get all your money back because they have a provisions fund.Surely in your example, the 1.66 loss would be (probably!) reduced somewhat by the PF? I said that
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jonah
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Post by jonah on Oct 6, 2015 20:18:27 GMT
You did. My apologies.
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2boi
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Post by 2boi on Feb 15, 2016 22:21:05 GMT
I am very interested to know that the listed bonds and p2p are parri passu. Why the better rate for bonds in that case? Just came across this. The 'Wellesley Listed Bond' is their ISA. It is not their 'Wellesley Mini Bond'. Their ISA is constructed in such a way that it is the same as their P2P lending - your money goes to the borrowers not to Wellesley. Hence parri passu with the p2p loans With the mini bond however the money goes to Wellesley - higher risk, not asset backed and therefore better rate. Congrats to Wellesley for inventing the p2p ISA, lost points for not making the difference between their products clearer.
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Post by Deleted on Jun 14, 2016 21:32:30 GMT
I see no mention of a Provision Fund on the Wellesley website.
Where is it mentioned?
Also, to which products does it apply? Does it include the 5-year Income?
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Post by mrclondon on Jun 14, 2016 22:28:07 GMT
I see no mention of a Provision Fund on the Wellesley website. Where is it mentioned? Also, to which products does it apply? Does it include the 5-year Income?
Looks like it has been renamed slightly as "Loan Provisioning" www.wellesley.co.uk/how-it-works/lending-statistics/
Operates in a similar fashion to SS in so far as the "provision fund" is essentially a reserved segment of the platforms working capital:
"Loan provisioning sets out the minimum level of funds that Wellesley Finance Plc has committed to allocate from its own funds for the protection of the Peer-to-Peer customer investments in the event of a default. Loan Provisioning operates on a loan by loan and discretionary basis and is determined according to the size of the current loan book and the risks associated with it. Therefore, the Loan provisioning balance will fluctuate as new loan facilities are granted and existing loans are repaid. At the discretion of Wellesley Finance losses incurred may be absorbed rather than provided for by recourse to Loan Provisioning."
It will NOT cover the mini-bonds, but is intended to cover all p2p terms (though for legal reasons on a discretionary basis).
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Jun 14, 2016 22:30:49 GMT
I see no mention of a Provision Fund on the Wellesley website. Where is it mentioned? Also, to which products does it apply? Does it include the 5-year Income? Its in the Lender Agreement Section 10 Applies to all loans but is discretionary (excludes bonds) Also in FAQ Q refering to FSCS protection, Why choose Well, Its not exactly shouted about because their main USP is auto-diversification Crossed with MRL who found it hiding elsewhere
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Post by Deleted on Jun 15, 2016 15:19:13 GMT
I see no mention of a Provision Fund on the Wellesley website. Where is it mentioned? Also, to which products does it apply? Does it include the 5-year Income?
Looks like it has been renamed slightly as "Loan Provisioning" www.wellesley.co.uk/how-it-works/lending-statistics/
Operates in a similar fashion to SS in so far as the "provision fund" is essentially a reserved segment of the platforms working capital:
"Loan provisioning sets out the minimum level of funds that Wellesley Finance Plc has committed to allocate from its own funds for the protection of the Peer-to-Peer customer investments in the event of a default. Loan Provisioning operates on a loan by loan and discretionary basis and is determined according to the size of the current loan book and the risks associated with it. Therefore, the Loan provisioning balance will fluctuate as new loan facilities are granted and existing loans are repaid. At the discretion of Wellesley Finance losses incurred may be absorbed rather than provided for by recourse to Loan Provisioning."
It will NOT cover the mini-bonds, but is intended to cover all p2p terms (though for legal reasons on a discretionary basis).
I don't have a Saving Stream account so I guess the Provision Fund is different to Zopa and RateSetter where I am guaranteed to recoup a loss about 4 months after default. What would be Wellesley's reason for not reimbursing me? I think I am a little over-extended on Wellesley and would like to put something elsewhere. How much depends on this Provision Fund.
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Post by mrclondon on Jun 15, 2016 18:37:04 GMT
I guess the Provision Fund is different to Zopa and RateSetter where I am guaranteed to recoup a loss about 4 months after default. What would be Wellesley's reason for not reimbursing me?I think I am a little over-extended on Wellesley and would like to put something elsewhere. How much depends on this Provision Fund. The obvious reason is the fund might not be big enough.
Wellesley's loan book currently stands at 115 loans totalling £230m so an average of £2m per loan, but individual loans could be much higher than £2m.
AC have estimated they expect 1 in 6 loans to default, which if replicated at W&CO implies 19 of the current loans could default. If each default resulted in a 15% capital loss , the total loss could be 19 X £2m x 0.15 = £5.7m vs the provisioning fund currently standing at £4.1m.
The popularity of platforms offering provision funds a few years back was mainly to do with tax efficiency (particularly for higher / additional rate tax payers) something that no longer applies as capital losses are now income tax deductible. Provision funds are essentially a zero sum game .... they have to be paid for by reducing the yield paid to you, so you are no longer actually gaining anything by investing with a platform that has one, or losing anything by investing with a platform whose provision fund that may or may not be able to cope.
The provision funds at Zopa (and Ratesetter to a lesser extent now they also offer huge loans) are perceived to be safer as the individual loans are much smaller than the provision fund, but it really is only an illusion.
I'm afraid no provision fund provides a guarantee a) it isn't legal for the platforms to do so, all provision fund payouts are legally discretionary and b) the provison funds can only payout if they have the funds to do so, plus as the fund runs out it may offer a token payout on many loans rather than a full payout on just a few.
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littleoldlady
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Running down all platforms due to age
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Post by littleoldlady on Jun 21, 2016 19:03:26 GMT
Personally I find the platform having skin in the game to be more reassuring than a discretionary PF.
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2boi
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Post by 2boi on Jul 5, 2016 23:20:15 GMT
Yes the skin in the game is nice to have; it focuses their minds at least. However no one knows how much of the skin is not theirs but the mini bond holders' skin'. Wellesley don't say and their last accounts are 2014. Easily the main protection though is the asset backing. Wellesley state they only loan 69% of the value so in theory at least property values would have to drop 31% before any losses (though there would be some admin expenses in having to sell the assets). This protection does not apply to the mini bonds hence the higher yield. It does apply to their old ISA bond though (the 'Wellesley Listed Bond'). There is a further and not insignificant protection for the ISA bond and P2P lenders - Wellesley say ‘ Our own investment is always the first to be used in the event of any loss’. Unfortunately for the mini bond holders, ' our own investment' I think includes them, since mini bond holders are investing in Wellesley, not in loans. So if the worst came to the worst (is it starting for commercial property already I wonder) mini bond holders would be wiped out before P2P and ISA bond holders are touched. The upshot is that Wellesley is simultaneously the safest for P2P investors (unlike many P2P companies who shockingly have ZERO asset backing) and one of the least safe (for mini bond holders). The mini bond interest premium over their P2P rates is surprisingly low for this significant risk. Further reading (though slightly erroneous) www.altfi.com/article/1679_wellesley_mini_bond_series_2_would_investors_be_better_off_investing_on_the_platform_directly
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