Liz
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Post by Liz on Oct 31, 2015 11:07:11 GMT
I'm done with TC, security(PG) values on a loan I hold were made up by the borrower and never checked by the sponsor or TC's, adding to a growing list of defaulted loans, many lenders have lost most of their investment, at least here we have physical assets that can be sold to recover at least a good proportion of the loan.
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Post by mrclondon on Oct 31, 2015 11:47:41 GMT
I agree with the thrust of the original post, the headline LTVs are often misleading, and I think it's a poor show. I am fairly new to all this and finding how it all works fascinating. A low LTV is deemed a good thing and its not surprising that that is what is often produced. The information seems to be there and its probably better than having to dig into company accounts etc as with equities. The LTVs I find a bit odd are when I believe they quote against the finished result of the project (GDV  , or could I be wrong). GDV = Gross Development Value = value of completed project The relevance of GDV is that it is an indicator of the likely improvement in security value during the project .... a bit like amortization but in reverse. Lets say we are being presented with a £700k loan against 1st charge security with a current OMV (open market value) of £1m so 70% LTV OMV and a GDV of £7m. 70% LTV OMV on a part completed project might feel on the risky side, but the GDV info tells us as the project progresses the loan LTV will drop steadily from 70% to 10%.
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unmadem
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Post by unmadem on Oct 31, 2015 11:51:34 GMT
I agree with the thrust of the original post, the headline LTVs are often misleading, and I think it's a poor show. me too, particularly where the displayed LTV only takes account of the SS loan and not others secured on the same asset.
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Post by mrclondon on Oct 31, 2015 12:02:57 GMT
I'm done with TC, security(PG) values on a loan I hold were made up by the borrower and never checked by the sponsor or TC's, adding to a growing list of defaulted loans, many lenders have lost most of their investment, at least here we have physical assets that can be sold to recover at least a good proportion of the loan. What ever the rights and wrongs of that particular loan are, unsupported PG's will rarely yield significant value if called upon. The only two of my loans on AC that I have pencilled in loss provisions for have unsupported PG's (Optics & G**; not in the plumber) Security values are only the value one "expert" has attributed to the asset at one particular moment in time, and against certain assumptions. The fact that the "expert" has professional indemity insurance is almost irrelevant, as it is the "unknown unknowns" that can render secuirty valuations hopelessly wide of the mark. The AC Kent Bridging Loan valuation was perfectly sound the day it was written, and is based on the not unreasonable expectation that the local planning authority would at some point give change of use permission to some future purchaser of the land. Then comes along a planning decision (possibly sloppily written is the current theory) that strongly implies the planning authority will never give change of use permission for the commercial development of the land. Result the land value has to be assumed as currently being n acres of poor quality agricultural land in need of clearance, i.e. practically worthless. Each loan on each platform needs to be evaluated on its own merits. Some of the TC loans are more secure than the best SS loan, but the worst secured TC loans are less secure than the worst SS loan.
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Post by GSV3MIaC on Oct 31, 2015 14:45:44 GMT
Or to paraphrase, the only real value of anything is what someone is prepared to give you for it .. unless the RICS surveyor has £2.5m and wants a mansion, then his estimate of £2.5m for the value is not suitable for banking.
Ask the Irish, Spanish property developers, or people buying tulip bulbs a few hundred years ago.
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mikes1531
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Post by mikes1531 on Oct 31, 2015 19:03:58 GMT
What ever the rights and wrongs of that particular loan are, unsupported PG's will rarely yield significant value if called upon. Here's one other significant factor to consider... Even if unsupported PGs are made at a time when the guarantor has significant verifiable assets, there's usually nothing to stop them from making multiple guarantees backed by those assets. And there's usually nothing to stop them using those assets for other things, or losing those assets to unfavourable market activities or unsuccessful business ventures. In short, by the time the borrower gets into the position where they can't keep up the payments on their 'guaranteed' loan they may have used up enough of the assets backing their guarantee that the PG becomes worthless. I've seen a high-end property valued at £4.5mm in 2004, sell in 2006 for £2.2mm. Similarly a factory valued at £12mm in 2005, sell 2 years later for £4.1mm. At least two of the distressed AC loans I'm in started when the borrowers' banks wanted out of their existing loans because the value of the property had collapsed from the level it was when those banks made their loans. The borrowers were able to settle their bank loans for pennies on the pound and funded that by taking out loans with seemingly reasonable LTVs based on the reduced valuations. But could the security be sold today at a price close to the reduced valuations? Good question. Hopefully these borrowers will be able to avoid foreclosure and we won't need to find out. Food for thought: Consider this comment from the valuation of the currently available FS loan -- the property is in NI... Anyone who lent against the purchase of such land during that period would have had a considerable loss even if they started out with what looked like a very conservative LTV.
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ablender
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Post by ablender on Oct 31, 2015 19:51:42 GMT
All the above discussion is interesting, but I do not think that it supports the initial statement that SS fabricated security values. Also if all the investors here were so worried about securities loosing their values down to the level of losing their investment, I think they would not be investing in the first place and put their money in a bank account, under a tile or in a mattress (make sure it is fire resistant). With this I am not saying that we should not try our best to do DD but we need to keep our head over our shoulders.
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Post by reeknralf on Oct 31, 2015 19:57:57 GMT
Take a look at the historical distribution of recovery outcomes for senior secured bank debt and senior secured loan debt (both less than <70% LTV). The average recoveries are around 85% and 67%, respectively. These are just the sort of figures I want, but don't know where to find. Where do these data come from?
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bababill
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Post by bababill on Nov 1, 2015 4:39:13 GMT
All the above discussion is interesting, but I do not think that it supports the initial statement that SS fabricated security values.
Perhaps I should have written that in my opinion SS has totally misled me in regards to the loan to value ratio. This was the first loan that I researched on SS and hence my opinion is not based on the vast offerings of SS.
Anyhow, a developer is in need of a loan of a 4,000,000 USD loan. Dollars are required as the developer has an overdraft in dollars which he wishess to pay down.There will be a first charge on an unencumbered 2 bedroom property within the M25 area and 500 meters of a train station. For further clarity and full transparency there is no mortgage on the property. The developer is willing to offer a rate of 22%. The property is valued at £5,000,000Note to self.-- don't forget to put in the fine print that the 5 million pound valuation is based on Egyptian pounds. Twenty two percent is calculated over a ten year period.
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upland
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Post by upland on Nov 1, 2015 5:25:58 GMT
I am fairly new to all this and finding how it all works fascinating. A low LTV is deemed a good thing and its not surprising that that is what is often produced. The information seems to be there and its probably better than having to dig into company accounts etc as with equities. The LTVs I find a bit odd are when I believe they quote against the finished result of the project (GDV , or could I be wrong). GDV = Gross Development Value = value of completed project The relevance of GDV is that it is an indicator of the likely improvement in security value during the project .... a bit like amortization but in reverse. Lets say we are being presented with a £700k loan against 1st charge security with a current OMV (open market value) of £1m so 70% LTV OMV and a GDV of £7m. 70% LTV OMV on a part completed project might feel on the risky side, but the GDV info tells us as the project progresses the loan LTV will drop steadily from 70% to 10%. I this case it does indeed make the proposition a lot more attractive. But if say the GDV was say £1.2M then if the project stalled would somebody else want to buy up the assets given that there is a lot less to be made out of the deal ? I recall one on AC that was a bit like that and I wondered about its merits.
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agent69
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Post by agent69 on Nov 1, 2015 9:35:06 GMT
There is a bigger problem with the TC SM and bridging type loans than the admin fee to sell. Many such loans on TC rollup some or all of the interest and pay that rolled up interest only on redemption. Hence such loans need to be listed on the SM at a premium to reflect the rolled up interest - but liquidy on TC's SM is very poor for parts listed at a premium (even if that premium is justifiable due to the rolled up interest). Contrast with SS where all loans pay interest monthly, and AC where in the rare cases of rolled up interest, it is held on account for the seller until redemption. If I could see £1000+rolled up interest of £100 Price £1100 without having to unearth a spreadsheet or 3 at dropbox I might go for it. There's a good example of this on the SM at present. TLC 9 is a roll up of capital and interest and is about half way through its 5 year term. Max bid rate allowed is 4.25%, and currently no takers.
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Post by mrclondon on Nov 1, 2015 11:36:33 GMT
But if say the GDV was say £1.2M then if the project stalled would somebody else want to buy up the assets given that there is a lot less to be made out of the deal ? I recall one on AC that was a bit like that and I wondered about its merits. Which is why the banks are extremely reluctant to take on any development risk. Selling a partially completete development is the stuff of nightmares. Even a project with a GDV of £7m could have paperthin profit margins. The only way to assess such a project is to research the likely demand for the underlying properties when completed. Which makes the speed the current FS loan on a Northern Ireland development project has filled all the more surprising.
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mikes1531
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Post by mikes1531 on Nov 1, 2015 16:17:04 GMT
But if say the GDV was say £1.2M then if the project stalled would somebody else want to buy up the assets given that there is a lot less to be made out of the deal ? I recall one on AC that was a bit like that and I wondered about its merits. Which is why the banks are extremely reluctant to take on any development risk. Selling a partially completete development is the stuff of nightmares. Even a project with a GDV of £7m could have paperthin profit margins. The only way to assess such a project is to research the likely demand for the underlying properties when completed. Which makes the speed the current FS loan on a Northern Ireland development project has filled all the more surprising. I agree, but I believe that very few P2P lenders do much DD. I expect that far too many do not understand the risks they are taking, and put their faith in the platform to do all the necessary DD, thinking that if the platform is willing to offer the loan to their investors then they must have done enough DD to convince themselves that the loan is worth doing. What those investors may not appreciate is that the platforms' business is in making loans, and that the platforms have no direct exposure to the risk of borrowers being unable/unwilling to repay. The platforms do, of course, have indirect exposure to 'non-performing' loans in that if they have too many of those their reputation as a good place for people to invest money will suffer and that could be fatal to the business. Perhaps that indirect exposure is enough for some investors to be happy to invest in anything a platform offers. And perhaps with enough diversification between loans, platforms, and asset classes, that's a reasonable approach for people who put only a small proportion of their net worth into P2P and don't want to spend a lot of time choosing their investments. But there will be losses, and some investors will have more than their fair share of them. There will be grumbles aired, and a certain amount of negative publicity will result. Whether that will be enough to reduce the public's enthusiasm for P2P/P2B investing significantly is a good question. As for the recent FS NI investment opportunity, there could be a couple more factors influencing investors. - Seeing other investors making massive investments will make some people think "If they're so confident as to invest £50+k in this loan then I'm willing to trust their judgement and so I'll invest too." They probably haven't thought about whether the £50+k might be a trivial amount to those deep-pocketed investors, or the fact that those investors will be earning 15% compared to the 12% earned by small investors and therefore can afford to take on more risk.
- Seeing the loan filling rapidly will have created a certain amount of herd mentality -- "If everyone else is investing heavily, perhaps I should too" -- along with a fear of being left out of what might turn out to be a good deal.
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merlin
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Post by merlin on Nov 1, 2015 16:47:44 GMT
I agree pretty much with mikes1531 and mrclondon. However I know for certain that when a loan goes really bad and the provider gets a whole load of negative publicity as a result they hurt like hell. I have had personal experience of this happening. I with many others had vented my feelings on this Forum and attempted to contact two of the principles by their preferred route. Neither were available or attempted to contact me at the time. Then I had the opportunity to fire a burst of red hot shrapnel at the them on the TV. Within an hour of the programme going out I had an email asking me when one of the principle's could contact me. Subsequently I did speak to the principle involved and he explained that the negative contributions on this site and my little contribution via TV had hurt their public image badly. Further he offered me a direct line for communication if I got "upset" with them again.
Lesson: P2P providers are seriously concerned about maintain a good public image. So it is worth using this this Forum when you think that you have a genuine grievance and failing that try going public.
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Post by tybalt on Nov 1, 2015 16:52:31 GMT
If I could see £1000+rolled up interest of £100 Price £1100 without having to unearth a spreadsheet or 3 at dropbox I might go for it. There's a good example of this on the SM at present. TLC 9 is a roll up of capital and interest and is about half way through its 5 year term. Max bid rate allowed is 4.25%, and currently no takers.
TLC9 pays at 7% pa payable monthly and has been doing so. As at August it was 'worth' £ 128,142 against a capital value of £ 106,000. However when you deduct income tax from the premium at 20% and say £ 35 for the s**k manufacturer where TCL are dependant on two PGs where no progress has been made on collection in 18 months the bid rate looks like a fair value rather than a steal.
The 'old' forum has a detailed analysis of TCL as at August.
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, or could I be wrong).
