bigfoot12
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Post by bigfoot12 on Oct 12, 2015 17:00:05 GMT
Yes, I presume so. Certainly that's been the case when they've added CB mid-way through property loan auctions, and I reckon they've no way of doing otherwise on draw-down (without a major system rewrite). Thanks, makes sense as anything else would encourage people to wait until the end on large loans.
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arbster
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Post by arbster on Oct 12, 2015 17:03:17 GMT
Thanks, makes sense as anything else would encourage people to wait until the end on large loans. Indeed, it would create a very unhelpful situation, and would unfairly discriminate against autobidders.
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bigfoot12
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Post by bigfoot12 on Oct 12, 2015 17:04:56 GMT
Indeed, it would create a very unhelpful situation, and would unfairly discriminate against autobidders. Not that either of those seem to have worried FC in the past!
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am
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Post by am on Oct 12, 2015 18:24:00 GMT
I put as much store by that as I do in the fact that no E has yet defaulted. I've no clue why anyone would lend money unsecured at 6% without at least the safety net of a substantial provision fund. I also bear in mind that it is 5% after FC take their 1% off (the same as they take their 1% off an 18+% E loan). Totally disproportionate from an A+ loan's base rate. And it should be thought of as 4.4% after allowing for default possibility (and one of my A+ loans went pop recently!) " ...if only so many loans didn't wind up as alleged A+s (which even at 8% don't look very tempting....
I've seen no answer yet as to why a former C borrower is now rated A+ for his replacement loan. #16297 (As the questioner said to the borrower, FC won't tell us). There is an argument that servicing an FC loan for some months without incident improves the creditworthiness of a business. But C to A+ does seem excessive.
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am
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Post by am on Oct 12, 2015 18:37:06 GMT
It is the larger A and A+ loans which are filling slowly. Do you think this is due to
1) the discretionary bidders preferring higher risk, higher return loans
2) autobidders having turned off A+ so they don't get lumbered with 6% A+ 12 month loans.
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baldpate
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Post by baldpate on Oct 12, 2015 18:38:25 GMT
I am expecting the announcement that from now on all loans are going to be A and A+ randomly. All other categories have proven to be superfluous and a total distraction for lenders and ping-pongers. You have voiced my own thoughts, TitoPuente. There certainly seems to be a trend developing. It would be consistent with FC's evident desire to position themselves for the mass (ISA?) market. No risk-takers wanted here, thank you very much!
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acky
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Post by acky on Oct 12, 2015 19:30:16 GMT
It is the larger A and A+ loans which are filling slowly. Do you think this is due to 1) the discretionary bidders preferring higher risk, higher return loans 2) autobidders having turned off A+ so they don't get lumbered with 6% A+ 12 month loans. I think it's simply that autobid will eat up 65%, leaving 35% for discretionary bidders. By definition, discretionary bidders are those prepared to spend more time managing their investments than autobidders and they expect (and until recently have received) a significantly higher return on their investments for their effort. Now fixed rates stop that, so discretionary bidders can't get a better return for their effort (other than standing a slightly better chance of avoiding defaults), so they've left in droves. Those who are left will likely put a similar amount into a small loan as a large loan, so there's enough left to fill 35% of small loans, but not large ones. Adding CB will entice a few more punters, but 1%CB is pretty insignificant over a 60 month loan and doesn't make a particularly attractive flip opportunity either.
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Post by GSV3MIaC on Oct 12, 2015 21:17:43 GMT
Yep, got it in one. There is no demonstrably, significantly, lower failure rate for A/A+, at least not enough to justify the ridiculously low rate (5% after fee on a short A+), so I ain't gonna play without a cashback incentive (property loans look better, but with different set of linked risks). 17% after fee for an E (assuming you can dodge the bullets) looks like a much better idea. However there are not enough high rated loans to fill the demand, so it's take the money and run elsewhere time. If FC want the loans to fill they can (and probably will) allow autobid to buy the whole damn things. If they want to grow their business from the likes of me, they need to offer a better deal (and some rather more transparent 'transparency', and deliver on the odd promise or two wouldn't hurt).
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Post by aloanatlast on Oct 13, 2015 0:13:53 GMT
It is the larger A and A+ loans which are filling slowly. Do you think this is due to 1) the discretionary bidders preferring higher risk, higher return loans 2) autobidders having turned off A+ so they don't get lumbered with 6% A+ 12 month loans. It's due to total lack of flipper interest. There were never enough buy-and-holders to fill large loans, but previously the flippers had their chunks in from the start to catch an early close at a good rate.
There's now no reason for anybody to pay a premium on these loans, so no profit in them.
It could get worse. There are still a lot of people buying clutches of 5s and 10s who I take to be 5-month sellers, but they could fade if they have to discount to unload.
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acky
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Post by acky on Oct 13, 2015 7:17:18 GMT
Yep, got it in one. There is no demonstrably, significantly, lower failure rate for A/A+, at least not enough to justify the ridiculously low rate (5% after fee on a short A+), so I ain't gonna play without a cashback incentive (property loans look better, but with different set of linked risks). 17% after fee for an E (assuming you can dodge the bullets) looks like a much better idea. However there are not enough high rated loans to fill the demand, so it's take the money and run elsewhere time. If FC want the loans to fill they can (and probably will) allow autobid to buy the whole damn things. If they want to grow their business from the likes of me, they need to offer a better deal (and some rather more transparent 'transparency', and deliver on the odd promise or two wouldn't hurt). My analysis of defaults suggests, in fact, that there IS a demonstrably lower default rate on A+, but not as you say on A. I have analysed the full loan book to calculate the probability of default for each grade based on the number of defaulting loans at each month since acceptance against the total population of loans reaching that month. This analysis is based just on number of loans, not weighted by the size of the loan, and excludes property loans. This suggests that the default rate on A+ is about half that of A, B and C. The difference in the default rates on A, B and C does not look statistically significant (in fact, B is a bit higher than C!). The default rate on D, however, is significantly higher, especially from month 15 onwards.
My view is that A+ rates are too low, even with the low default rate, and that A, B and C rates aren't worth the risk either. I think D and E are worth buying for a short-term hold, but they are too difficult to buy unless you have a bot (I don't) or check the website every 10 minutes (which I also don't).
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acky
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Post by acky on Oct 13, 2015 7:34:40 GMT
Although in my previous post, I said the default rate on A+ was demonstrably lower than other grades, I can't be confident this will continue. I've just had a look at the currently available A+ loans (curiosity rather than any intention to invest) - a right hotchpotch, small companies, including some with small profits, very low net assets, ridiculous management accounts (e.g. negative liabilities), Q&A which shows lack of understanding of finances, unspectacular credit scores, no audit. Come on, FC, get a grip - these loans do not justify an A+ rating - no way!
Now that the REAL market can't determine the interest rate, it feels as though FC have taken on the mantle - i.e. question: how much will this borrower be prepared to pay?; answer: only 8%'ish; conclusion: oh well, they must be A+ then!
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arbster
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Post by arbster on Oct 13, 2015 7:36:44 GMT
Although in my previous post, I said the default rate on A+ was demonstrably lower than other grades, I can't be confident this will continue. I've just had a look at the currently available A+ loans (curiosity rather than any intention to invest) - a right hotchpotch, small companies, including some with small profits, very low net assets, ridiculous management accounts (e.g. negative liabilities), Q&A which shows lack of understanding of finances, unspectacular credit scores, no audit. Come on, FC, get a grip - these loans do not justify an A+ rating - no way! Remember that they have exclusive access to the PG information, which for small loans might just possibly be worth the paper they're written on. Maybe.
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acky
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Post by acky on Oct 13, 2015 7:40:24 GMT
Although in my previous post, I said the default rate on A+ was demonstrably lower than other grades, I can't be confident this will continue. I've just had a look at the currently available A+ loans (curiosity rather than any intention to invest) - a right hotchpotch, small companies, including some with small profits, very low net assets, ridiculous management accounts (e.g. negative liabilities), Q&A which shows lack of understanding of finances, unspectacular credit scores, no audit. Come on, FC, get a grip - these loans do not justify an A+ rating - no way! Remember that they have exclusive access to the PG information, which for small loans might just possibly be worth the paper they're written on. Maybe. As you say .... maybe. And PG value can change a lot over 5 years, especially if one's business gets into trouble.
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arbster
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Post by arbster on Oct 13, 2015 7:52:33 GMT
For me it rather depends how these small businesses view their Funding Circle loan. If they consider it to be more important because it's "other peoples' money", then hopefully they'll make their FC repayments at the expense of other debts. Sadly, I fear that in many cases they will consider it to be more disposable than debt to suppliers (upon whom they rely for business), banks (who can make other aspects of their business difficult) and family (who you apparently can't choose), so we'll be at the back of the queue when the going gets tough. This is especially true now that FC have eroded the "personal" aspect of the funding process by removing auctions, and sidelining Q&As. We're just a bunch of faceless wallets to borrowers now. It's not really P2P, or even P2B any more. It's just investing.
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Post by GSV3MIaC on Oct 13, 2015 8:31:37 GMT
Acky, I did the analysis about 9 months ago, using money lost as a percentage of money reaching that month, and after discounting the effect of the infant mortality curve. It is made more challenging since you need to know when early repayments happened, which is not obvious from the loan book.
A+ did look a bit better, but significance was, iirc, marginal and the difference was small.
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