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Post by Butch Cassidy on Nov 24, 2015 21:34:48 GMT
I like AC for their solid asset backed loans & refusal to lower their acceptance criteria & the fact that they take DD seriously (often so exhaustively seriously it takes more than 6 months to get a loan successfully through the system!), however, the collective knowledge pool that investors represent in terms of accounting, legal, business, local & other relevant experience is far greater than anything AC can provide & comes free of charge. This crowd DD should be seen as complimentary to what AC can contribute & not as a threat but it is impossible to achieve, if as is proposed, loans are only going to be listed when about to go live.
A major advantage of P2P lending is to allow collective due diligence to vet loan applications & tease out information that is pertinent to the risk of the proposition, to the benefit of everyone. This is not only relevant to new loans but can prove valuable as ongoing monitoring of current loans, as already has been shown on Leeds, Manchester Commercial, Kent & several others when highlighting issues that either AC was not aware of or had failed to recognise the seriousness of their significance. Perhaps andrewholgate could explain why loans cannot be listed on an upcoming list, perhaps 3-4 weeks ahead, without any drawdown date (as these are now totally discredited) which would allow DD to commence & then transferred to an u/w called list when within a week of drawdown & investors could then plan investments & set targets before making final adjustments when drawdown was imminent.
I realise AC have taken a lot of criticsm for the lack of the promised dealflow & then also some for early drawdowns but all investors really want is to have a system they can understand & makes sense; which both allows for collective Q&A/DD then gives a short window to make funding available (how hard can that be?) Now that we are to get a good flow of deals  it will be a great time to start such a predictable system.
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Post by mrclondon on Nov 24, 2015 23:44:07 GMT
100% agree with that, you've only to look at the several loans that had to be pulled after crowd due dilligence had raised serious concerns, perhaps the best example is a certain "fish farm". The level of crowd DD prior to loans drawing down (i.e. when it really matters) has been steadily decreasing ... once retail lenders were cut out of the primary market, crowd DD primarily rested with the underwriter pool, and now underwriting is provided predominately by the QAA the 2 or 3 days before a loan goes live is the only crowd DD. It is inevitable that bad loans will slip through the net. As an aside it increases the risk that the QAA holds an illiquid loan post drawdown if lenders spot a major flaw in the proposal.
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bigfoot12
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Post by bigfoot12 on Nov 25, 2015 0:11:31 GMT
"Why should pipeline loans be hidden until the last minute?" Because when they did show them earlier (for most of the last year) people bitch and moan that they take longer to draw down than AC expected, even though the moaners have not committed any funds at that point. If AC draw a loan quicker than expected people bitch and moan about that too.
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mikes1531
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Post by mikes1531 on Nov 25, 2015 1:35:37 GMT
"Why should pipeline loans be hidden until the last minute?" Because when they did show them earlier (for most of the last year) people bitch and moan that they take longer to draw down than AC expected, even though the moaners have not committed any funds at that point. IMHO there's a simple solution to that, as Butch Cassidy suggested -- don't suggest any estimated drawdown timing until the "Underwriting Called" flag is added and drawdown is imminent. One thing that's worse than saying "I don't know" is giving a seemingly confident answer to a question when you really haven't a clue.
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pikestaff
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Post by pikestaff on Nov 25, 2015 8:34:10 GMT
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shimself
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Post by shimself on Dec 2, 2015 10:11:47 GMT
100% agree with that, you've only to look at the several loans that had to be pulled after crowd due dilligence had raised serious concerns, perhaps the best example is a certain "fish farm". The level of crowd DD prior to loans drawing down (i.e. when it really matters) has been steadily decreasing ... once retail lenders were cut out of the primary market, crowd DD primarily rested with the underwriter pool, and now underwriting is provided predominately by the QAA the 2 or 3 days before a loan goes live is the only crowd DD. It is inevitable that bad loans will slip through the net. As an aside it increases the risk that the QAA holds an illiquid loan post drawdown if lenders spot a major flaw in the proposal. I tried and failed to get the p2pfa to insist that there was a window (72hrs?) between when a loan was listed and when bids could be placed, exactly to ensure that lenders were not pressured into lending without time for DD and reflection. I had FK in particular in mind, AC have often given us, oh, ample time, and bless them many times over for the make your own notes field I thought it might even protect the platforms against some sort of mis-selling accusation, but anyway they didn't agree, but I still think they are wrong. Given that the time to think is diminishing at AC they should perhaps send us an email when a loan goes up; I missed the last couple because my weekly visit is now insufficiently frequent
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Post by chris on Dec 2, 2015 11:50:05 GMT
100% agree with that, you've only to look at the several loans that had to be pulled after crowd due dilligence had raised serious concerns, perhaps the best example is a certain "fish farm". The level of crowd DD prior to loans drawing down (i.e. when it really matters) has been steadily decreasing ... once retail lenders were cut out of the primary market, crowd DD primarily rested with the underwriter pool, and now underwriting is provided predominately by the QAA the 2 or 3 days before a loan goes live is the only crowd DD. It is inevitable that bad loans will slip through the net. As an aside it increases the risk that the QAA holds an illiquid loan post drawdown if lenders spot a major flaw in the proposal. I tried and failed to get the p2pfa to insist that there was a window (72hrs?) between when a loan was listed and when bids could be placed, exactly to ensure that lenders were not pressured into lending without time for DD and reflection. I had FK in particular in mind, AC have often given us, oh, ample time, and bless them many times over for the make your own notes field I thought it might even protect the platforms against some sort of mis-selling accusation, but anyway they didn't agree, but I still think they are wrong. Given that the time to think is diminishing at AC they should perhaps send us an email when a loan goes up; I missed the last couple because my weekly visit is now insufficiently frequent The automated email is on our list. Think it's developed and awaiting sign off.
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Post by Butch Cassidy on Dec 15, 2015 20:21:59 GMT
Following investor complaints about short notice & opaque allocations, & the consequent impossibility to plan/fund investments, on loan drawdowns AC have finally acknowledged what many investors have known for some considerable time (& a few have pointed out on this forum, even though AC representatives have tried to deny it!) that "pricing for risk" has been quietly dropped; Below is part of an answer given on loan #208
"The best overall solution however is to raise loan origination which we recognise and have now done with over £100m of quality enquiries per month presently, however to do so we have reduced the interest rate premium above solely ‘pricing for risk’ in order to be more competitive in the market as we seek to match challenger bank lending for the overall benefit of all concerned."
This has been the obvious consequence of lack of loan supply for the last few months & increased market competition but when it has been so clear to see why deny it? I think it is both necessary & unavoidable for AC to drive the required volumes that they have promised/need to fulfil both their vision for the future & the bullish promises made at the time of the equity fund raiser, however it would have been better to acknowledge it when it was first pointed out rather than sneak it out in a Q&A reply.
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Post by chris on Dec 15, 2015 20:50:26 GMT
Following investor complaints about short notice & opaque allocations, & the consequent impossibility to plan/fund investments, on loan drawdowns AC have finally acknowledged what many investors have known for some considerable time (& a few have pointed out on this forum, even though AC representatives have tried to deny it!) that "pricing for risk" has been quietly dropped; Below is part of an answer given on loan #208
"The best overall solution however is to raise loan origination which we recognise and have now done with over £100m of quality enquiries per month presently, however to do so we have reduced the interest rate premium above solely ‘pricing for risk’ in order to be more competitive in the market as we seek to match challenger bank lending for the overall benefit of all concerned."
This has been the obvious consequence of lack of loan supply for the last few months & increased market competition but when it has been so clear to see why deny it? I think it is both necessary & unavoidable for AC to drive the required volumes that they have promised/need to fulfil both their vision for the future & the bullish promises made at the time of the equity fund raiser, however it would have been better to acknowledge it when it was first pointed out rather than sneak it out in a Q&A reply. You must be reading something other than the sentence you've highlighted. It expressly says we're pricing to risk and that we've just reduced the premium above risk that we had been charging. To give an example with made up numbers if we calculate that the premium should be 7% when pricing strictly to risk, but market conditions such as lender liquidity, the pricing of our competition, cost of underwriting, etc. all add up to us having to charge the borrower 11% of which 9% gets passed on to the lender then we're pricing above risk. If we now reduce that premium by 1% then both the lender and borrower see a 1% reduction in premium. That is us reducing the interest rate premium above solely pricing for risk.
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Post by Butch Cassidy on Dec 15, 2015 21:04:59 GMT
Following investor complaints about short notice & opaque allocations, & the consequent impossibility to plan/fund investments, on loan drawdowns AC have finally acknowledged what many investors have known for some considerable time (& a few have pointed out on this forum, even though AC representatives have tried to deny it!) that "pricing for risk" has been quietly dropped; Below is part of an answer given on loan #208
"The best overall solution however is to raise loan origination which we recognise and have now done with over £100m of quality enquiries per month presently, however to do so we have reduced the interest rate premium above solely ‘pricing for risk’ in order to be more competitive in the market as we seek to match challenger bank lending for the overall benefit of all concerned."
This has been the obvious consequence of lack of loan supply for the last few months & increased market competition but when it has been so clear to see why deny it? I think it is both necessary & unavoidable for AC to drive the required volumes that they have promised/need to fulfil both their vision for the future & the bullish promises made at the time of the equity fund raiser, however it would have been better to acknowledge it when it was first pointed out rather than sneak it out in a Q&A reply. You must be reading something other than the sentence you've highlighted. It expressly says we're pricing to risk and that we've just reduced the premium above risk that we had been charging. To give an example with made up numbers if we calculate that the premium should be 7% when pricing strictly to risk, but market conditions such as lender liquidity, the pricing of our competition, cost of underwriting, etc. all add up to us having to charge the borrower 11% of which 9% gets passed on to the lender then we're pricing above risk. If we now reduce that premium by 1% then both the lender and borrower see a 1% reduction in premium. That is us reducing the interest rate premium above solely pricing for risk. So the drop in investor rate from 12-15% that was normal 12 months ago & the new 9-10% normal has no correlation to the complete lack of loans & increased market competition over the last few months? I am happy that the underlying quality has not been allowed to drop but it is just a question of where you draw the baseline for the "risk price" - investor headline rate or X% below that, your definition is obviously the latter.
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Post by chris on Dec 15, 2015 21:23:30 GMT
You must be reading something other than the sentence you've highlighted. It expressly says we're pricing to risk and that we've just reduced the premium above risk that we had been charging. To give an example with made up numbers if we calculate that the premium should be 7% when pricing strictly to risk, but market conditions such as lender liquidity, the pricing of our competition, cost of underwriting, etc. all add up to us having to charge the borrower 11% of which 9% gets passed on to the lender then we're pricing above risk. If we now reduce that premium by 1% then both the lender and borrower see a 1% reduction in premium. That is us reducing the interest rate premium above solely pricing for risk. So the drop in investor rate from 12-15% that was normal 12 months ago & the new 9-10% normal has no correlation to the complete lack of loans & increased market competition over the last few months? I am happy that the underlying quality has not been allowed to drop but it is just a question of where you draw the baseline for the "risk price" - investor headline rate or X% below that, your definition is obviously the latter. We have a very expensive team of credit officers who combined have decades of experience in building credit models and risk analysis. This team sets the base price that we will not go below. The lender team then have input as to current lender liquidity and underwriter appetite, and then it's up to the sales team to close the deal with a fair and balanced price that allows both the lender and platform to profit whilst remaining fair to the borrower. If the sales team can't close the deal at that price because the borrower can get a loan cheaper elsewhere then we lose the deal, we do not compromise on quality. Those processes, models, and the data fed into them are more robust now than when we first started out, and changes in lender appetite are allowing us to go after lower risk lower rates loans and to be competitive in that marketplace. Couple this to efficiencies at the platform level so that our costs are lower and that equals a lower borrower rate and the ability to do loans that we couldn't do before. Those are the loans you are seeing coming to the platform at lower rates than before.
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Post by Butch Cassidy on Dec 15, 2015 22:25:56 GMT
All that may well be true & is partly the reason why AC is my largest P2P investment but as an investor I also need to factor in not only the inherent risk of the loan proposition (the ultimate price of which is the headline investor rate) but the chance of AC suspending trading possibly for months on end, the years it may take to finally get an LPA vote & subsequent recovery & then compare that to the competitor offerings; with 16-18% available at LC & FC, 13-14% at AR & 12% at MT & SS & question whether they offer better value.
Are the loans that they source really twice as risky or just better value for money? Looking at the recent 9-10% loan offerings on AC I really can't see that they are 25%+ safer propositions than 12 months ago, whatever any credit model may say but then again I don't believe FC when they almost overnight sourced 75% A+ & A grade loans to coincide with launching their new fixed rate options but they are adamant that their credit model is also correct, Bondora tried the same & all this was at exactly the same time that p2p went mainstream & market competition increased  . Ultimately demand is outstripping supply & that forces down price but to succeed any platform also needs to remain competitive.
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shimself
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Post by shimself on Dec 17, 2015 19:03:29 GMT
.. We have a very expensive team of credit officers who combined have decades of experience in building credit models and risk analysis. This team sets the base price that we will not go below. The lender team then have input as to current lender liquidity and underwriter appetite, and then it's up to the sales team to close the deal with a fair and balanced price that allows both the lender and platform to profit whilst remaining fair to the borrower. If the sales team can't close the deal at that price because the borrower can get a loan cheaper elsewhere then we lose the deal, we do not compromise on quality. Two sorry THREE teams of people and yet we get to see one loan a week. Are they part time?
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mikes1531
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Post by mikes1531 on Dec 17, 2015 20:10:50 GMT
Two sorry THREE teams of people and yet we get to see one loan a week. Are they part time? : Aren't you being a little bit harsh? AC have three loans totalling £839k scheduled to draw down tomorrow.
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Dec 17, 2015 20:52:11 GMT
Two sorry THREE teams of people and yet we get to see one loan a week. Are they part time? : Aren't you being a little bit harsh? AC have three loans totalling £839k scheduled to draw down tomorrow. Having been following the upcoming updates pretty closely for several months, I came to the conclusion that the slow pipeline has very little to do with AC. Delays are generally down to borrowers and their lawyers (Stuart has implied as much) who very definately appear to be part time. AC seem to spend an inordinate amount of time chasing stuff.
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it will be a great time to start such a predictable system.
. Ultimately demand is outstripping supply & that forces down price but to succeed any platform also needs to remain competitive.