Another property loan not repaid on time

ptr120
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Another property loan not repaid on time Oct 8, 2015 7:50:43 GMT

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Post by ptr120 on Oct 8, 2015 7:50:43 GMT

loan number 12052 was due to be repaid yesterday and hasn't. Surprise surprise, we've had this problem with the same borrower in the past. Previously FC have declined to apply penalty interest and promised to improve communication to better manage the expectations of lenders. I do understand that property development loans can sometimes complete a couple of days late, but it isn't exactly hard to call the MS and the borrower 14 days before repayment is due to confirm if full repayment will be made on time (i.e. 1 day before it is due to be repaid to borrowers), and if not to ask if they have other funds to repay the loan, and if not, to inform borrowers and to apply penalty interest.

Instead, we get a wall of silence from FC. Is this really good enough? I've noticed that some of my property loans are due to complete in the week between Christmas and New Year. Chances of them completing on time? Slim, i'd say!

jayjay
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Another property loan not repaid on time Oct 8, 2015 12:26:09 GMT

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Post by jayjay on Oct 8, 2015 12:26:09 GMT

Oct 8, 2015 7:50:43 GMT ptr120 said:

loan number 12052 was due to be repaid yesterday and hasn't. Surprise surprise, we've had this problem with the same borrower in the past. Previously FC have declined to apply penalty interest and promised to improve communication to better manage the expectations of lenders. I do understand that property development loans can sometimes complete a couple of days late, but it isn't exactly hard to call the MS and the borrower 14 days before repayment is due to confirm if full repayment will be made on time (i.e. 1 day before it is due to be repaid to borrowers), and if not to ask if they have other funds to repay the loan, and if not, to inform borrowers and to apply penalty interest.

Instead, we get a wall of silence from FC. Is this really good enough? I've noticed that some of my property loans are due to complete in the week between Christmas and New Year. Chances of them completing on time? Slim, i'd say!

They repaid 8049 from the same borrower a day early today and it was not due till tomorrow. Probably just an allocation or mis-allocation issue. As you say no explanation as yet.

adrianc Member of DD Central Posts: 10,014 Likes: 5,142	Another property loan not repaid on time Oct 8, 2015 12:52:34 GMT Quote Select Post Deselect Post Link to Post Back to Top Post by adrianc on Oct 8, 2015 12:52:34 GMT Different tranches of the same project, I presume? If so, you'd expect the earlier loan to be repaid first.

jayjay
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Another property loan not repaid on time Oct 8, 2015 14:45:58 GMT

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Post by jayjay on Oct 8, 2015 14:45:58 GMT

I am sure in this case it is academic, but it begs the question about 'pari passu' discussed on another thread. Which is the senior tranche? The one with the earlier maturity date (by two days) or the one with the lower loan number. Apparently it is the latter. I guess this is telling us the First Cut is the most credit worthy and we should rate earlier tranches as slightly better bets than later ones.

arbster
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Another property loan not repaid on time Oct 8, 2015 15:00:02 GMT

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Post by arbster on Oct 8, 2015 15:00:02 GMT

Oct 8, 2015 14:45:58 GMT jayjay said:

I am sure in this case it is academic, but it begs the question about 'pari passu' discussed on another thread. Which is the senior tranche? The one with the earlier maturity date (by two days) or the one with the lower loan number. Apparently it is the latter. I guess this is telling us the First Cut is the most credit worthy and we should rate earlier tranches as slightly better bets than later ones.

As has been pointed out in the past, I think, the first tranches tend to be paying for land acquisition, initial groundworks, etc, and sometimes are in advance of full planning permission. Therefore, they have additional risk attached, when compared with investing in a half-completed development with the major hurdles out of the way (barring selling the properties, but the LTV should cover that).

jamesc
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Another property loan not repaid on time Oct 8, 2015 18:45:00 GMT

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Post by jamesc on Oct 8, 2015 18:45:00 GMT

Hi I am new to all this but I too have the aforementioned loan 12052 and in the recent loan comments it says the loan will not be repaid until after the 16th when the other earlier tranches are settled. My question is does interest accrue between the date it should have settled and when it does finally settle and is this a common problem ? Thanks

jayjay
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Another property loan not repaid on time Oct 8, 2015 22:17:48 GMT

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Post by jayjay on Oct 8, 2015 22:17:48 GMT

Yes this is a clear message that the last tranche of any loan is going to carry the can of any delayed payment or problems. It is the least credit worthy tranche. The example of 12052 is that we must wait till three other tranches clear (some paid early apparently with the money you would think due on it!?) It is usually marginal in its effect, but beware of the last tranche is my conclusion.

blender
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Another property loan not repaid on time Oct 8, 2015 22:31:53 GMT

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Post by blender on Oct 8, 2015 22:31:53 GMT

Oct 8, 2015 22:17:48 GMT jayjay said:

Yes this is a clear message that the last tranche of any loan is going to carry the can of any delayed payment or problems. It is the least credit worthy tranche. The example of 12052 is that we must wait till three other tranches clear (some paid early apparently with the money you would think due on it!?) It is usually marginal in its effect, but beware of the last tranche is my conclusion.

Yes, I think that FC should offer at least 2% cash back on any last tranche in compensation for the risk.

awk Posts: 276 Likes: 147	Another property loan not repaid on time Oct 9, 2015 6:32:23 GMT Quote Select Post Deselect Post Link to Post Back to Top Post by awk on Oct 9, 2015 6:32:23 GMT After all that, it looks like it was repaid overnight.

jayjay
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Another property loan not repaid on time Oct 9, 2015 6:38:19 GMT

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Post by jayjay on Oct 9, 2015 6:38:19 GMT

Oct 8, 2015 18:45:00 GMT jamesc said:

Hi I am new to all this but I too have the aforementioned loan 12052 and in the recent loan comments it says the loan will not be repaid until after the 16th when the other earlier tranches are settled. My question is does interest accrue between the date it should have settled and when it does finally settle and is this a common problem ? Thanks

So suddenly this morning I think they have paid it up. Last night I was looking at a note saying it was the last tranche and it was policy to pay it up last ie not until after 16 Oct. This morning the note has gone and the money is in my account. I don't think they deducted a days interest from 8049 and added it to 12052 - this could annoy if you hold substantial holdings in one or both, which I do not.

I guess I now conclude all tranches ARE treated equally 'pari passu' ie a random decision on seniority can be made or reversed at any time.

am Posts: 1,495 Likes: 601	Another property loan not repaid on time Oct 9, 2015 21:38:16 GMT Quote Select Post Deselect Post Link to Post Back to Top Post by am on Oct 9, 2015 21:38:16 GMT If the intention was for tranches to be repaid strictly in order tranches should not have been set up such that a later tranche matures before an earlier one. Did that happen?

aloanatlast

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Another property loan not repaid on time Oct 10, 2015 3:44:09 GMT

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Post by aloanatlast on Oct 10, 2015 3:44:09 GMT

Oct 9, 2015 21:38:16 GMT am said:

If the intention was for tranches to be repaid strictly in order tranches should not have been set up such that a later tranche matures before an earlier one. Did that happen?

The repayment calculator can only deal with whole months. The end date is the same day of the month as the start date. Traditionally this is 7 days after the start of the auction, unless the loan is accepted early.

But auctions are only started 5 days a week, so any attempt to synchronise the end dates of tranches, even if not messed up by an early acceptance, would be liable to get messed up by a weekend.

But there doesn't seem to be any such attempt. The ones I've looked at just have the end dates of tranches randomly scattered over a month in no particular order.

blender Member of DD Central Posts: 5,719 Likes: 4,272	Another property loan not repaid on time Oct 10, 2015 7:33:44 GMT Quote Select Post Deselect Post Link to Post Back to Top Post by blender on Oct 10, 2015 7:33:44 GMT They always add some contingency to these property loans and expect them to be paid off well before the last month starts.

jayjay
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Another property loan not repaid on time Oct 10, 2015 9:01:32 GMT

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Post by jayjay on Oct 10, 2015 9:01:32 GMT

I expect too that the repayment schedule from the borrower does not necessarily match the maturity payment of the loan tranches. ie there will be an implicit contingency. In this case it looked as if Fully Cashed had all the money on time but were messing about with some internal rule that tranches had to be repaid in order of issue above order of maturity. How they execute their 'rules' effect the relative rating of the tranches. I am not sure I am any the wiser.

am

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Another property loan not repaid on time Oct 10, 2015 19:37:58 GMT

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Post by am on Oct 10, 2015 19:37:58 GMT

Oct 10, 2015 9:01:32 GMT jayjay said:

I expect too that the repayment schedule from the borrower does not necessarily match the maturity payment of the loan tranches. ie there will be an implicit contingency. In this case it looked as if Fully Cashed had all the money on time but were messing about with some internal rule that tranches had to be repaid in order of issue above order of maturity. How they execute their 'rules' effect the relative rating of the tranches. I am not sure I am any the wiser.

If they had all the money they could and should have paid of all the tranches simultaneously on the first available payment run. I presume that they did not have all the money.

Another property loan not repaid on time

Post by ptr120 on Oct 8, 2015 7:50:43 GMT

Post by jayjay on Oct 8, 2015 12:26:09 GMT

Post by adrianc on Oct 8, 2015 12:52:34 GMT

Post by jayjay on Oct 8, 2015 14:45:58 GMT

Post by arbster on Oct 8, 2015 15:00:02 GMT

Post by jamesc on Oct 8, 2015 18:45:00 GMT

Post by jayjay on Oct 8, 2015 22:17:48 GMT

Post by blender on Oct 8, 2015 22:31:53 GMT

Post by awk on Oct 9, 2015 6:32:23 GMT

Post by jayjay on Oct 9, 2015 6:38:19 GMT

Post by am on Oct 9, 2015 21:38:16 GMT

Post by aloanatlast on Oct 10, 2015 3:44:09 GMT

Post by blender on Oct 10, 2015 7:33:44 GMT

Post by jayjay on Oct 10, 2015 9:01:32 GMT

Post by am on Oct 10, 2015 19:37:58 GMT