niceguy37
Member of DD Central
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Post by niceguy37 on Oct 21, 2015 14:04:00 GMT
Ok I am wrong on this.
Lendy do commit to all payments
sounds like a terrible business model - crikey! Well, as a business model it seems to be working well for them so far. It seems to be giving lenders confidence that the loans are being thoroughly vetted by SS since their money is on the line, enabling SS to take on large loans with reasonable confidence of filling them, and permitting very rapid growth. Before using us lenders to fund their business they were carrying the can for any loan defaults, so this has not changed.
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mack
Posts: 85
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Post by mack on Oct 21, 2015 14:07:02 GMT
Ok I am wrong on this.
Lendy do commit to all payments
sounds like a terrible business model - crikey! It's only terrible if they underwrite very poor loans. With arrangement fees and the percentage taken the borrower is coughing up at least 20%. Investors are getting 12% so the assets have to sell for 12% below 70% LTV in most cases to lose out and even then there will be cover from the provision fund. The business model to me seems pretty good with the amount they have been able to loan so quickly by reducing the downside for investors.
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webwiz
Posts: 1,133
Likes: 210
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Post by webwiz on Oct 21, 2015 17:58:12 GMT
Ok I am wrong on this.
Lendy do commit to all payments
sounds like a terrible business model - crikey! Maybe that's one reason why they are changing it. There are benefits and disbenefits to lenders in the new arrangements. If eventually allowed into an ISA, IMO the benefits come out on top.
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webwiz
Posts: 1,133
Likes: 210
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Post by webwiz on Oct 21, 2015 18:01:14 GMT
Investors are getting 12% so the assets have to sell for 12% below 70% LTV in most cases to lose out and even then there will be cover from the provision fund.
Only if the loan lasts a year before defaulting. Normally the break even point will be 70-n% where n is the number of monthly interest payments made.
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Post by Deleted on Oct 22, 2015 10:53:15 GMT
Investors are getting 12% so the assets have to sell for 12% below 70% LTV in most cases to lose out and even then there will be cover from the provision fund.
Only if the loan lasts a year before defaulting. Normally the break even point will be 70-n% where n is the number of monthly interest payments made. Saving Stream collects the interest in advance for the loan period. So SS should be reimburse people for interest even without payments.
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webwiz
Posts: 1,133
Likes: 210
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Post by webwiz on Oct 22, 2015 11:29:41 GMT
Investors are getting 12% so the assets have to sell for 12% below 70% LTV in most cases to lose out and even then there will be cover from the provision fund.
Only if the loan lasts a year before defaulting. Normally the break even point will be 70-n% where n is the number of monthly interest payments made. Saving Stream collects the interest in advance for the loan period. So SS should be reimburse people for interest even without payments. Actually the loan cannot really default before the end date as AIUI the borrower does not make any payments before then.
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james
Posts: 2,205
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Post by james on Nov 1, 2015 2:52:14 GMT
... 2) I don't know what your p2p experience is, but mine tells me that loans will not tend to get into difficulties near the start of the loan term, but more typically towards the end when the need to pay it back looms closer. Ammortising loans will have less of a problem in this regard, but bridging loans (which is what we are dealing with here) do not ammortise. So, whether rightly or wrongly, lenders tend to assume that older loans are more likely to default, so they sell them before the end of the term. If the security is good and the LTV low enough then the provision fund will likely make good any problems with smaller loans, so they aren't so much of a worry. ... I disagree with rule 2. Where interest is with held, for the first part of the loan we are in an information vacuum. We have no way of telling whether the loan is going well or not. The news, good or bad, we typically find out towards the end, so it is towards the end we are best positioned to differentiate good loans from bad. All else being equal, Loan A: 'planning granted, bank X offered to take us out' is preferable to loan B: 'we'll let you know in a few months'. Loan C, two weeks after drawing down is safer than A or B. There is little prospect of bad news other than fraud by the ultimate borrower or Lendy within two weeks so the seller can take their interest, knowing that they have done so before anything bad could happen. The challenge here is not differentiating between good and bad loans but avoiding having any need to distinguish by getting out before there is a chance to go bad. In loans to consumers the approach can end up relying on an assumption that identity or other fraud will not be investigated and hence not be discovered until after at least the first repayment is missed, so aiming to sell before then could be tried. I've never used either approach but I do see the logic.
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