j
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Post by j on Feb 11, 2014 21:26:38 GMT
j1 - Common thought. As I said in my email a few weeks ago, wouldn't it be nice to be able to rid ourselves of the auction process and go straight for performing loan units? Would that make a big difference to you? Seems to work for LI (or Montello Bridging). , yes & no. I think an option like this is very useful for large loans where an underwriter effectively guarantees the loans being fully filled in a reasonably short space of time, whilst allowing the smaller investors a slice of it. For smaller loans, I think we all can 'safely' say the number of AC members now can fill those compared to a few months ago. The DD process & exchange of thoughts on her & AC's Q&A I certainly wouldn't want to lose full stop. It's very hard to give a straight answer. As an example, the recent large London loan, I bid a decent amount to help take out the underwriter whilst loan was live, which is all very well. A few days later some loan parts came on the aftermarket that would have offered me some diversification, but I couldn't buy as my money was/still is tied up in that loan! Hence my recent comments about not bidding on large loans which have underwriting, that way I have flexibility in knowing I will pick units in the larger loans in the near future, but have loose change available if I need to make quick buying decisions. You can never reach a happy medium for all parties but, with the interaction between you & us, we'll hopefully get close enough though. Out of curiosity, what percentage level do underwriters cost? if you can divulge that sort of info, if not, I understand.
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Post by chris on Feb 12, 2014 11:27:13 GMT
Is AC confident these loans will fill? Just less than 5 days to go and another £1.45mm is required to fill both. The AC investor base seems only to have bid for around 500k; the rest is underwriting. I hope AC have a few more underwriters in reserve because I'd like both off these loans to go ahead. We're aware that underwriting is going to be needed to fill these - always is on these larger loans even though they always sell down pretty quickly on the aftermarket. Further underwriting is being put in place and will be reflected on the site once formalised.
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mikes1531
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Post by mikes1531 on Feb 12, 2014 14:57:04 GMT
Is AC confident these loans will fill? Just less than 5 days to go and another £1.45mm is required to fill both. The AC investor base seems only to have bid for around 500k; the rest is underwriting. I hope AC have a few more underwriters in reserve because I'd like both off these loans to go ahead. We're aware that underwriting is going to be needed to fill these - always is on these larger loans even though they always sell down pretty quickly on the aftermarket. I think this is to be expected. From the lenders' point of view, in these cases it's clear that a lot of underwriter money is going to be required, so there will be lots of loan parts available once the loan is drawn down. So there's no incentive to invest at the time of the auction and suffer the 'dead' money issue while waiting for drawdown. The only way AC could counter that would be to offer cashback for lenders who bid in the auction as compensation for the delays. No doubt AC -- or the borrower -- have to pay something for the underwriting, so perhaps they could use some of that money to compensate early lenders instead of paying underwriters. I haven't a clue what underwriting costs, so I don't know how realistic a suggestion that is.
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Post by valerieb on Feb 12, 2014 15:26:30 GMT
Yes, the cashback incentive seems a good idea. I know it's probably just a matter of appearance as the secondary market will eventually mop up most of the loans, but it won't look good if too many loans end with only a small percentage financed by active bidders. It may put some new, potential lenders off.
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Post by paul123 on Feb 12, 2014 16:17:50 GMT
Samford71, I'm also a TCer looking to increase my exposure to AC. Once you get to 10k, you get some kind of secret squirrel mode that give you more and earlier options as I understand it. I'm keeping to a certain amount per loan until I'm in to at least 10 loans. Then I'm going to increase to above 10k and see what happens. Maybe it'll become easier to invest more widely then.
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Post by chris on Feb 12, 2014 16:40:07 GMT
Samford71, I'm also a TCer looking to increase my exposure to AC. Once you get to 10k, you get some kind of secret squirrel mode that give you more and earlier options as I understand it. I'm keeping to a certain amount per loan until I'm in to at least 10 loans. Then I'm going to increase to above 10k and see what happens. Maybe it'll become easier to invest more widely then. Nothing automatic happens at £10k, but if you drop me a line when you're at that point I'll introduce you to the customer care team and make sure you're introduced to the Gold club. Otherwise it will be picked up eventually but as it's a manual process there's no guarantees on the time line.
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Post by chris on Feb 12, 2014 16:50:08 GMT
We're aware that underwriting is going to be needed to fill these - always is on these larger loans even though they always sell down pretty quickly on the aftermarket. I think this is to be expected. From the lenders' point of view, in these cases it's clear that a lot of underwriter money is going to be required, so there will be lots of loan parts available once the loan is drawn down. So there's no incentive to invest at the time of the auction and suffer the 'dead' money issue while waiting for drawdown. The only way AC could counter that would be to offer cashback for lenders who bid in the auction as compensation for the delays. No doubt AC -- or the borrower -- have to pay something for the underwriting, so perhaps they could use some of that money to compensate early lenders instead of paying underwriters. I haven't a clue what underwriting costs, so I don't know how realistic a suggestion that is. I'm not sure I'd be thanked for publicly declaring our underwriting costs, but it is a cost burden that has to be priced into our loans where we expect it to be necessary. In many ways this is like FC's flippers except the costs are hidden from view which I guess is making it more palatable. The other thing to consider is that with underwriters the costs of the facility are the same whether it's used or ultimately bid out. So cashback could be an alternative. It's not had the same effect as on FC in the past where uptake on the loans wasn't significantly boosted. I'm personally in favour of its strategic use but so far the stats haven't backed me up on that. I suspect that allowing selling for a premium on the aftermarket would also boost early interest in loans but that isn't at all popular with the lender base.
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Post by bracknellboy on Feb 12, 2014 17:57:12 GMT
Samford71, I'm also a TCer looking to increase my exposure to AC. Once you get to 10k, you get some kind of secret squirrel mode that give you more and earlier options as I understand it. I'm keeping to a certain amount per loan until I'm in to at least 10 loans. Then I'm going to increase to above 10k and see what happens. Maybe it'll become easier to invest more widely then. Nothing automatic happens at £10k, but if you drop me a line when you're at that point I'll introduce you to the customer care team and make sure you're introduced to the Gold club. Otherwise it will be picked up eventually but as it's a manual process there's no guarantees on the time line. Be very wary john334: that could be a Nazgûl masquerading as Chris: they are trying to suck you into their Shadow world.
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oldgrumpy
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Post by oldgrumpy on Feb 12, 2014 18:04:49 GMT
"a Nazgûl masquerading..."
Hey, Brackers!! They were one of Grumps's main armies during many huge RISKy battles in the 1970s!! Trouble was even they gave up on me if stuck with General fotherington-tomas with the pink army! 
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unmadem
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Post by unmadem on Feb 12, 2014 19:14:41 GMT
We're aware that underwriting is going to be needed to fill these - always is on these larger loans even though they always sell down pretty quickly on the aftermarket. I think this is to be expected. From the lenders' point of view, in these cases it's clear that a lot of underwriter money is going to be required, so there will be lots of loan parts available once the loan is drawn down. So there's no incentive to invest at the time of the auction and suffer the 'dead' money issue while waiting for drawdown. If the recent changes to reduce drawdown times work this may help IF people can become confident that the dead time is smaller. Maybe it would be a good idea to publish the stats on that on the web site.
I'd also guess, particularly since we now have a couple of days to peruse the full reports, that most of the bids on these large loans are on the first day, with a small boost on the last day with not very much happening in between. If that is true I suspect keeping the auction open for more than 3 or 4 days probably doesn't add much funding and if anything puts people off bidding as they would prefer just to get it on the aftermarket.
Obviously as others have said cashback to compensate for dead time would be good.
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Post by paul123 on Feb 12, 2014 19:45:20 GMT
Fascinating. With underwriting available, zero fees on the aftermarket and no 0.25% incentive there's small to no reason to participate in the primary auctions unless buying on the SM is too awkward or too blink-and-you'll-miss-it.
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pikestaff
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Post by pikestaff on Feb 13, 2014 0:51:30 GMT
...there's small to no reason to participate in the primary auctions unless buying on the SM is too awkward or too blink-and-you'll-miss-it. Which it tends to be at the moment. But I see growth in underwriting leading to the SM being the main market for smaller investors. At which point I will want to know, how can I be an underwriter and what does it pay? (BTW I see TC moving in the same direction if psm has his way...)
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Post by pepperpot on Feb 13, 2014 1:04:02 GMT
I doubt there has been over a million of the Leeds loan change hands, so unless it's part of the plan from the off, the 'official' underwriters are holding on to what they are brought in to cover. It's only people like First Lender who off loaded a lot of anglesey at Christmas (incidentally, well over half that loan is still held by original bidders) that let us small timers in on the action - thankyou, First Lender. So there's no guarantee that there will be millions available of these two bridges on the aftermarket.
My thoughts on the underwriting fee (I'm not fishing for any sort of conformation/denial here) is that AC effectively pass on some or all of their monitoring fee (which is variable, c.1-1.5% ish I think), so lose a lot of, or all, the underwritten portion of the business. If it was any more, there would be no point in AC going ahead with the loan. Much less and why then should the underwriters get involved. And as the fee is fixed, they want to be out bid by us to reduce the amount they need to part with and proportionally increase their fee.
So what's needed is more of us smaller lenders to act as collective underwriters to keep the business 'in house' and pass the excess off on the aftermarket. Benefits are that more people get access to the loan (those that have not yet joined for example), AC retain a larger fee, and people have less need to be fastest finger first when parts pop up. Which they would do periodically depending on how long different people feel comfortable being over exposed to a particular loan, do ya feel lucky? and, of course, how easy it is to move into a new one.
It's just how to use part (or all) of the additional retained fee as an incentive for us to participate.
The cash backs were last used at a time when loans offers seemed to be increasingly open ended, a 0.5% cashback in conjunction with a 4 week cut off is tempting. 1% would be extremely tempting.
Otherwise, as AH has suggested a couple of times now, do away with the auction and intend to sell everything on the 2ndry, but that might mean an 'underwriters' size fee on the whole loan, reducing the rates to us. If they are reduced by say an av. of 0.5 -1% (changing the current 10-15 range to 9-14 ish) but you can get funds working from day one, I might not feel too put out. There would need to be a mechanism in place, in that scenario, to limit the amount people can take of the smaller loans, similar to the restricted bidding on the primary.
I feel there is a perfect P2P site just waiting to bloom and the AC asset backed loans are excellent fertiliser.
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mikes1531
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Post by mikes1531 on Feb 13, 2014 4:42:31 GMT
I doubt there has been over a million of the Leeds loan change hands, so unless it's part of the plan from the off, the 'official' underwriters are holding on to what they are brought in to cover. IIRC, Chris has said that the horseshoe charts continue to update after a loan is drawn down, so that if there had been a chunk of the horseshoe that was 'underwriter' green then it should shrink as those loan parts are sold on the Aftermarket. So it should be obvious to all whether the underwriters are still wanting to sell some loan parts or not. The Leeds chart is showing no underwriter involvement now, so if the entire portion of the loan that was underwritten at the time the auction ended hasn't come to the Aftermarket then it suggests that the underwriter has decided to keep some of the loan for themselves. There's nothing to say, however, that they'd keep that holding for the whole life of the loan -- especially Leeds which is 3-years, interest only -- so some of that holding might become available on the Aftermarket eventually. If the underwriters are confident that they can sell loans on the Aftermarket quickly, they might decide to hang on to Leeds loan parts, for instance, until shortly before they need to supply underwriter funds for a loan that's about to be drawn down.
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Post by paul123 on Feb 13, 2014 6:38:40 GMT
...there's small to no reason to participate in the primary auctions unless buying on the SM is too awkward or too blink-and-you'll-miss-it. Which it tends to be at the moment. But I see growth in underwriting leading to the SM being the main market for smaller investors. At which point I will want to know, how can I be an underwriter and what does it pay? (BTW I see TC moving in the same direction if psm has his way...) I think you're on to something there. I think he'd like to shunt all the little people into the TLC/son-of-TCL loans. But I'm not going to give up 0.5% and all control of who I lend to. For me, there's always the suggestion, that I saw somewhere, that AC really only exists to provide access to underwriting (fees) for parts or VIP customers of the Assetz group. If so, being an underwriter may not be available to regular mortals like me. Plus of course being an underwriter means being able to find all of the money for a loan not just a big chunk. (unless they agree amongst themselves) Also, another point about SM is that presumably the underwriter would be very skilled or may employ others at determining risk so wouldn't invest unless they were sure about the deal. But then maybe they only want the loan to stay good enough to offload it and keep the fee (I feel I'm arguing myself into a corner here) Is there a list of underwriters so that when we buy on the SM, we know if we're buying from a underwriter or not?
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