blender
Member of DD Central
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Post by blender on Mar 22, 2014 17:47:04 GMT
Liquidity continues to worsen on the FC secondary market, with now over 18,000 unsold loan parts at par or better, including 1800 at discounts up to 2%. C- loan parts are particularly difficult to shift. FC is now in effect confirming in another place the recent imbalance between new borrower supply of loans and available lender funds, and talking up potential new fund sources (rather like they did in November). But do not expect liquidity to improve very soon because the concrete action to be taken is to alter this coming week the statements on the site about the speed of cashing in your loan parts. This is a particularly senesitive matter because, as I understand it, the forthcoming regulation does not require a cooling off period for lenders if a secondary market is provided. But if it does not work without losses?
Have you thought of advertising, FC?
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mikeb
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Post by mikeb on Mar 22, 2014 18:46:30 GMT
I'm not exactly some hardcore professional flipper, but ... since Jul 2011 when I first started selling loan parts (excess exposure, or ditch-on-late-payment), I have made *something* every month on selling loan parts.
From a small top-up on the interest payments, to getting more from loan sales than in interest.
Nov-Dec-Jan was okay, but February was unusually cr*p for sales.
So far, March has seen NOT ONE loan part sold at premium. Nothing. Not even 0.3%.
I have loan parts at par that I have relisted 3 times that don't shift. Not even autobid will pick them up. Selling at a discount would bar me from appearing on autobid due to FC policy, further restricting chances to sell.
If it wasn't for autobid, I doubt anything would be moving. So yes, liquidity is a bit stuffed.
On the other hand, those that are moving, with the consequent 0.25% fee loss to FC, are being replaced at much higher rates -- let's hope that they keep paying up!
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Post by GSV3MIaC on Mar 23, 2014 9:04:01 GMT
The secondary market rates are now so crazy that if you bought anything at MBR you'd be lucky to shift it at even 3% discount on any normal duration loan. Last time I looked there were 300 or so C- parts at 13.5% or higher. Definitely a buyers market, with no buyers.
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Post by bracknellboy on Mar 23, 2014 9:10:40 GMT
Yes, definitely a trifle concerning. I have a number of loans I want to downsize and can't (nearly all ones I've held for a while, plus a couple of newer ones where I've managed to overbid). I have been bolstering my FC pot picking up new loans at better rates with an intent of riding out the storm for 2 or 3 months before shedding some of my older lower rate loan parts. That would normally fit OK with FCs historic liquidity cycles. But I may have to stop participating in new loans: I've always considered/treated my FC position to be one I could significantly unwind relatively quickly (barring platform failure), but its rapidly morphing into a very illiquid set of assets.
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Post by davee39 on Mar 23, 2014 9:42:52 GMT
My hand full of loans bought at MBR look unsalable, like many I only look now at the £70K+ loans which can give a decent margin above MBR. Interesting market dynamics ahead. If Flippers drop out because they cannot re-sell then rates will rise making loans more costly overall and discouraging borrowers. IF FC re-introduces the 1% cash back flippers would pile in to re-sell at 0% markup. My suggestion - a cash back paid to lenders once a loan has been held for 6 months to separate the flippers from the holders.
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wysiati
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Post by wysiati on Mar 23, 2014 11:45:44 GMT
A few thoughts:
- As repeatedly mentioned before, as long as there is an MBR escalator policy from FC it is not a good strategy to buy at/close to the prevailing MBR unless willing to hold for term (some may still speculate about a subsequent fall in achieved auction rates).
-It has been suggested many times before but FC has so far shown no interest in providing rewards specifically to those who actually hold loans for the medium/long term. The rewards have always been focused on successful bidding / short term balance increases (often motivating a mass shift to resale at 0% premium). Previous rounds have seen the system freeze by the end as such a high proportion of the loan parts bid for were unwanted by the bidder other than for cashback - with loan parts from newly completed auctions well above the market average for those rates sitting unsold for 2 months+ at 0%. Pure flipping of the latest loans is now a more crowded strategy it seems so it requires more early acceptances and/or higher asset turn at lower premiums.
- The ability to sell at 3% premium has not disappeared if you have the right loan parts (buyers have greater choice than ever before, can in many case meet their needs from the auction market alone given the improved deal flow, and are being more selective with the extrapolation of rising rates). Trying to sell recently completed auctions at a premium is currently more difficult. Those with higher rate (clearly >MBR) loan parts in trouble-free non 'mega-loans' more than a few months old should not struggle to sell at premiums never mind failing to sell at all. Having scooped up loan parts at 0% premium 12-18 months ago often at the tail end of cashback promotions I am now able to sell these at +3% in many cases even below MBRs as there has been an influx of buyers who do not have these and the lps now have much shorter remaining term loans and reflect some form of price appreciation. I accept that not all would have the willingness/patience to employ that strategy however. For those who have complaints are based on an inability to sell at an instant profit an instrument sold with up to a 5 year term - that's the risk you take.
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Post by Duane Dibley on Mar 23, 2014 12:51:43 GMT
So far, March has seen NOT ONE loan part sold at premium. Nothing. Not even 0.3%. That isn't my experience to be honest. I've been a net seller on FC for the past 12 months or so since new platforms came to the market. Rates have certainly come down over the last few months but all my sales have still been at a premium, generally between 0.5 - 1% at the moment but some still up to 3%. Of course a lot depends on the quality of the loans, mine have usually been A or B's and all at least 18 months old with good repayment histories, but I certainly wouldn't give up hope if I was you. As wysiati says you can't expect to sell recent loans with long terms remaining at a premium, but even so over time I would expect these to sell. As with most things, the secondary market on FC is cyclical and it won't be long before the current low prices pick up again.
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Post by bracknellboy on Mar 23, 2014 14:38:40 GMT
A few thoughts: - As repeatedly mentioned before, as long as there is an MBR escalator policy from FC it is not a good strategy to buy at/close to the prevailing MBR unless willing to hold for term (some may still speculate about a subsequent fall in achieved auction rates). No, not a good strategy. But as a long term holder I have a fair chunk of my book (~ 25%) which is either below, at, or within a small margin of MBRs. I didn't do what many on here declared they were going to do and churn out their old sub MBR loan parts when this was first announced. More fool me I guess.
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Post by GSV3MIaC on Mar 23, 2014 19:10:11 GMT
Strange there was no MBR increase this month when it would have had minimal impact, except on autobidders.?!
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min
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Post by min on Mar 24, 2014 8:38:01 GMT
A few thoughts: - As repeatedly mentioned before, as long as there is an MBR escalator policy from FC it is not a good strategy to buy at/close to the prevailing MBR unless willing to hold for term (some may still speculate about a subsequent fall in achieved auction rates). No, not a good strategy. But as a long term holder I have a fair chunk of my book (~ 25%) which is either below, at, or within a small margin of MBRs. I didn't do what many on here declared they were going to do and churn out their old sub MBR loan parts when this was first announced. More fool me I guess. Suspect the MBR escalator has run its course for now. Seems to have achieved presumed goal of increasing returns to lenders. I suspect FC saw the glut of borrowers coming and thought it better long term strategy to raise MBR rather than do a cashback to entice new lenders or new money from existing lenders. What would help 'older' lenders is if Autobid would pick up loan sales at a discount. Maybe they could put it as an option for autobidders. However doubt it will happen at the moment as still struggling to fill loans on primary market (5504 - 90% full with just under 9 hours to go). I am sure that one will fill but will the borrower accept if rate is too high?
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oldgrumpy
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Post by oldgrumpy on Mar 24, 2014 8:52:24 GMT
....However doubt it will happen at the moment as still struggling to fill loans on primary market (5504 - 90% full with just under 9 hours to go). I am sure that one will fill but will the borrower accept if rate is too high?....
Seems to be a slight problem with the big loans. I wonder what expectations are raised by what FC says when the loan is being applied for.
e.g.
(For an A risk company) "Oh yes, there is a minimum bid rate of 7.9% so you may get close to that."
or, "loans of this size have been finalised at 9-9.5% in recent months; you may get lower."
No doubt the borrowers have already sized up some options before applying, so if scenario No 1 is used, they may well be applying when they already have an offer lower than No 2 beforehand. That would lead to some of the rejections for "rate too high".
Maybe.
With 5504 (a C-) have they had an 11.6% (MBR) suggested as an outcome, or a more likely 12.6%, which may exceed another chance they may already have? I shall avoid it. It has one of those "healthy Experian Credit report" that FC trumpet about on their website...NOT!!!
(Ey-up ... better not mention trumpets  )
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markr
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Post by markr on Mar 24, 2014 9:50:53 GMT
Liquidity is going to be even worse for the next couple of days because they are tinkering about with the direct debit system and there may not be much returned capital to re-invest.
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merlin
Minor shareholder in Assetz and many other companies.
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Post by merlin on Mar 24, 2014 10:42:57 GMT
No, not a good strategy. But as a long term holder I have a fair chunk of my book (~ 25%) which is either below, at, or within a small margin of MBRs. I didn't do what many on here declared they were going to do and churn out their old sub MBR loan parts when this was first announced. More fool me I guess. Suspect the MBR escalator has run its course for now. Seems to have achieved presumed goal of increasing returns to lenders. I suspect FC saw the glut of borrowers coming and thought it better long term strategy to raise MBR rather than do a cashback to entice new lenders or new money from existing lenders. What would help 'older' lenders is if Autobid would pick up loan sales at a discount. Maybe they could put it as an option for autobidders. However doubt it will happen at the moment as still struggling to fill loans on primary market (5504 - 90% full with just under 9 hours to go). I am sure that one will fill but will the borrower accept if rate is too high? I agree the whole subject of MBR's escalators etc is confusing to many. However had you been involved with FC in the middle of last year you may remember that there was a sudden and very large increase in MBR's. Now whilst many questions were raised on the "official Forum" and the "old indie" shortly followed by a rapid return to lower rates. I cannot remember ever receiving a satisfactory reason for FC doing this although it caused an awful lot of grief among investors. However following this they did (almost bimonthly) slowly raise rates until they more or less reached the current level and now the escalator seems to have stopped. Of course during this period we also saw the introduction of the C- band.
My biggest grip with FC is the opaque nature of the business and particularly their dealing with their investors. Last Saturday I attended the "Assetz Lenders Day" what a breath of fresh air that was. Why oh Why does FC have to be so secretive about what and why it is running its business and dealing with us the lenders who keep them in business?
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Post by bracknellboy on Mar 24, 2014 11:38:44 GMT
You've really gone and done it now Merlin. I better get on and put all my AC loans up for sale pronto.
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Post by GSV3MIaC on Mar 24, 2014 15:48:42 GMT
The MBR escalator may have run its course, but rates still haven't got to where FC wanted to put them last July, when they first tried, so I suspect more may yet happen.
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