blender
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Post by blender on Feb 14, 2014 15:51:35 GMT
I think we mostly agree here BracknellBoy. The main problem is a creeping FC perception to think of these loans as FC loans and to worry about 'our exposure', which is of course a false and dangerous perception. Rather than thinking of the exposure of FC to the borrower, FC should think in terms of its responsibilities to both consortia separately, and when faciliating the second loan and looking after the interests of the potential consortium it should also look at the interest of the existing consortium, which usually has an interest in not having the loan repaid without penalty. FC has no possible authorisation through the T&Cs to require a borrower in these circumstances to repay an existing loan, but the borrower has the right to repay it. In arranging the new loan FC is perfectly justified in making new loan contingent upon the borrower reducing other liabilities and insisting that the borrower's plan to do so is made part of the contract, in which case the borrower could not change his mind without the new loan becoming immediately repayable.
When FC sales people are looking at repeat business with an existing FC customer (as it must seem) and with the fees, it is easy to forget who the lenders are and just to roll things up in a new loan at some lower rate. This current problem is probably a result of FC acting as if it is a party to the loan rather than an agent. Presumably there are now two loans with the same borrower at A+ and A! We know that they are really both A, and that FC has screwed this up and cannot find a way out.
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jm72
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Post by jm72 on Feb 14, 2014 15:57:59 GMT
There were two loans, one with A+ and the other with A, until FC decided to re-rate the new loan to A leaving the investors who had just lent £70,000 at an average rate of 6.7% (max of 7.4%) with loan parts rated A (with a minimum bid rate of 7.9%).
Personally, my view is that the only way out of this now is for FC to refund the money on the second loan and take on the interest payments itself. It had the opportunity to refuse to allow the borrower to not repay the original loan (FC was holding onto the money) or to get the auction re-run, but didn't take it.
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Post by phlitb on Feb 14, 2014 16:06:04 GMT
4573 (along with its accrued interest) has now been removed from my account, no indication yet whether this is yet another cock-up or a prelude to a refund. Wouldn't it be nice if FC communicated with its investors...
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jm72
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Post by jm72 on Feb 14, 2014 16:10:55 GMT
I've just downloaded my loan book - it is there as Repaid. Looks like FC might have done the right thing and refunded it. No new comment on the loan yet though - but the status of all payments is now 'Paid'.
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jm72
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Post by jm72 on Feb 14, 2014 16:15:32 GMT
And it looks as though the associated loan has been repaid as well (loan 1141). Wonder what they'll do about any purchases / sales on loan parts on these over the past 4 weeks?
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jm72
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Post by jm72 on Feb 14, 2014 16:22:09 GMT
And the note attached 'We have taken the decision to settle both this loan (ID 4573) and the other loan to this borrower (ID 1141) and take over the liability from our investors. The decision to increase the total lending to this business and change the risk band was made after loan 4573 had completed. We accept that it was not right to lower the risk band from A+ to A in retrospect. We apologise for this. The funds will appear in your account today and the loan will display as “repaid”. In future, no decision to increase total lending to a business will be made without listing a new loan request.'
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Post by oldatheist on Feb 14, 2014 16:23:14 GMT
Presumably FC have taken both these loans on themselves and our repayments have come from them rather than the borrower, who is probably unaware of all the fuss they have inadvertently created.
Edit. Too slow
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Post by davee39 on Feb 14, 2014 17:05:40 GMT
Very well done to FC. They realized the implications of their mistake and corrected it. I was displeased to find I had a small part of this. They have done the right thing (Quickly) and have no doubt learned from the experience.
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Post by phlitb on Feb 14, 2014 17:22:33 GMT
Very well done to FC. They realized the implications of their mistake and corrected it. I was displeased to find I had a small part of this. They have done the right thing (Quickly) and have no doubt learned from the experience. Yes, kudos to FC, certainly a satisfactory solution. But do they really have no means of emailing affected lenders to explain the situation?
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Post by bracknellboy on Feb 14, 2014 17:29:18 GMT
Credit is due: extended as if A rated, not A+ of course.
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Post by bracknellboy on Feb 14, 2014 17:32:49 GMT
... In future, no decision to increase total lending to a business will be made without listing a new loan request.' Which suggests that their modus operandi policy IS to pay the first loan off out of the second loan i.e. only release the balance. Which fits with their initial actions. In other words the act of increasing the lending was a concious one, and if that is not normal then it means they must pay off the balance rather than release and rely on the borrower subsequently paying off.
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jm72
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Post by jm72 on Feb 14, 2014 17:59:39 GMT
I agree - credit where credit is due and good that this was fixed (including paying accrued interest). FC hasn't bitten on suggestion that any trading in loan 1141 / 4573 over this recent period should be reversed - both loans repaid due to FC balls-up - I know if I had purchased some of this and had 'we've messed up and therefore repaying the loan', I would be complaining. But maybe that's just me and pushing things a bit too far.
Good result so far.
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oldgrumpy
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Post by oldgrumpy on Feb 14, 2014 18:08:48 GMT
Yes - good work FC : you have defused a nasty situation quite quickly; but it had to be done.
On another note, I see somewhat more detailed explanations are appearing on notes connected with late/default loans.
I do hope FC are having a big shake up on lender relations.
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blender
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Post by blender on Feb 14, 2014 20:54:11 GMT
Personally, my view is that the only way out of this now is for FC to refund the money on the second loan and take on the interest payments itself. It had the opportunity to refuse to allow the borrower to not repay the original loan (FC was holding onto the money) or to get the auction re-run, but didn't take it. I am pleased that FC have taken responsibility. I think it is unusual for FC to hold onto part of the loan, and maybe this borrower wanted more than was allowed. I am waiting for 28*0 to be repaid out of funds from 47*3 according to the usual formula. 2880 was risk band removed, and still is, but the new loan was received (or at least interest is repayable) from 4th Feb. The new loan is for 36k and the old balance 23k, both 60 months. So after FC fees there is not much extra. Borrower is currently paying interest on both loans. I assumed that the delayed repayment of the old was due to the fact that, on early repayment, interest is payable up to the next repayment on 26th Feb, so why not keep it until 25th? The fact remains that the borrower has 59k outstanding at present and could decide against repaying the first loan in the same way as this problem borrower. Would this change C to C- or are they OK for 59K? I am not suggesting there is anything wrong with this loan or borrower and I expect the first loan to be repayed - but what stops this problem happening again? Remember that one of the early C- loans borrowed about 100k and very soon wanted a top up of about 20k, and was forced to take out a new loan (they said) and repay the first. They sat on 200k for a couple of months (an FC IT problem it was said). The first loan was repaid to lenders eventually. They could have changed their mind. I do not think I understand how FC propose to remove this risk.
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Post by bracknellboy on Feb 14, 2014 22:06:30 GMT
Personally, my view is that the only way out of this now is for FC to refund the money on the second loan and take on the interest payments itself. It had the opportunity to refuse to allow the borrower to not repay the original loan (FC was holding onto the money) or to get the auction re-run, but didn't take it. .....They sat on 200k for a couple of months (an FC IT problem it was said). The first loan was repaid to lenders eventually. They could have changed their mind. I do not think I understand how FC propose to remove this risk. I'll be honest: I am thoroughly confused about the process here. I have over 12-14 months emailed FC about 3 times in respect to borrowers in this same situation, and never got a definitive. I would say that the latest instantiation actually suggests that the current normal process is NOT to release the full value to the borrower and be dependent on them paying back, but rather for FC to only release the balance. I am therefore increasingly of the view that the significant delays that seem to inevitably happen between new loan release and old loan payoff are in fact an FC internal process issue. Maybe.
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