First default

MikeS,

hopefully I can clarify some of the points you raise.

For every loan we have to plan a route to dispose of assets in the event of a default. This is done, at least in outline, at the time the loan is accepted. In each case we have to make sure that we understand, and obtain, fair market value.  This is a legal requirement and can be achieved by offering at auction or by obtaining multiple independant estimates of value. 

For some items disposing of them is simple - if one of the valuers has underwritten the amount we can go back to them to sell the asset directly. For other items we may have to wait for a suitable auction - or repeated auctions if they do not sell initially. Clearly if they continually do not sell at auction we have to make other arrangements - with alternative auctions, private sellers etc.

For some assets we are able to set up the necessary arrangements even before the term date - for example if the borrower notifies us in advance that they will not be repaying. In other cases it will take longer. This is especially true if the borrower has previously indicated their intention to repay - and then either is very late or doesn't repay. Of course we still prepare, as much as possible, for a potential default, but it is usually in everyone's interest if the borrower does repay.

The final point is very simple - some assets are very easy to sell, some are more difficult. For example one piece of jewellery may be modern and the market for it extremely good.  Another piece of jewellery may simply be out of fashion with a very thin potential market.

Of course, added to the above, we are also constrained by consumer law - which dictates actions and timetables that must be followed in the event of a default.

Hope this helps a little.

FundingSecure

PS: regarding email notification - whenever a loan is completed (whether repaid, renewed,defaulted) an email is sent to all active investors in that loan.  The loan will then appear at the top of your list of completed loans in "My Investment History". In the event of a default the actual return information is added to the loan details.

It would be good if fundingsecure could update us on where we are with the Lubin paintings. The loan was due to repay in November, so more than three months have elapsed and seemingly not a single painting as been sold, given that lenders were going to be paid a sum each time a painting was sold. Can you let us know what is happening please?

And a not very encouraging update at that.  The conclusion I'm coming to is that if a loan secured on a specialist item defaults then the recovery process could be very slow.

I would go just a little bit more cautious than RR. So my policy has always been with P2P and other high earning funds, don't lend what you cannot afford to lose. For as sure as God makes little apples in this investment zone you will almost certainly lose something some when.

Persian Carpet Loan, #1826608530

In their 23/Apr (Thursday) update, FS said...
'Tomorrow' has come and gone, and at the moment the loan is not showing either as repaid or as defaulted.

fundingsecure:  I think an update is overdue.

Perhaps I should make it clear that I agree that a consensual solution with the borrower is likely to produce the best result for everyone.  So I'm happy to wait a little while for the borrower to raise the funds to either repay or renew the loan.  But I would like to be kept informed of the progress.  And if FS say that something will happen on a specific day, then I expect them either to do what they've said or provide an update letting their investors know why it didn't happen and where things stand.  Am I being unreasonable?

I don't know what to think about the above loan.  It would be a renewal of an existing loan.  The amount is the same, the asset value is the same.  So I do wonder what's really meant by the Status of 'Asset Checking'.  FS looking in their vault to make sure the security hasn't jumped ship?

As far as I'm concerned, the issue is communications.  This loan was due yesterday, but there's no comment in the loan itself.  Does the fact that the loan has appeared on the Coming Soon list mean the borrower has indicated they wish to renew the loan?  Or has FS put it on the list just in case the borrower might want to renew?

IMHO there isn't a problem as long as all renewals are accompanied by payment of all accrued interest and FS fees.  At that point the renewal loan is not really different from a brand new loan.  In those circumstances, I think I'd be happy for loans to be renewed multiple times.  It is appropriate, of course, that values be rechecked every time there's a renewal to insure the security still is adequate. 

And if borrowers ever try to do a renewal that increases the loan size to cover the accrued interest/fees, that's probably the time to seriously consider opting out of the renewal, though it might be reasonable if the LTV is low and the valuation is believed to be reliable..