Obsolete - do not use until updated. IM
Feb 29, 2016 21:05:05 GMT
wiseclerk, paul123, and 15 more like this
Post by ilmoro on Feb 29, 2016 21:05:05 GMT
So a thread was started for people to ask questions, though it might be worth having a place where its easy to find the answers. So as and when they appear Ill try & add them to this post. Ive started with a few. All suggestions welcome
Frequently Asked Questions (Being updated to reflect new procedures)
Disclaimer: Nothing contained below constitutes financial advice and no warranty is offered for its accuracy. Note that these answers are a personal interpretation, are not official & may not be definitive as platforms evolve. Its always best to ask Savingstream directly if unsure and consult a IFA if advice is required before investing. I am not a financial professional.
Common abbreviations: SS - SavingStream, SM - Secondary Market, PF - Pre-Funding (or Provision Fund subject to context) PM - Primary Market, LTV - Loan to Value (ie loan/security value as percentage), PBL - Property Bridging Loan (sometimes pebble), DFL - Development Finance Loan, INPL - Invest Now, Pay Later, BH - Big Hitter (ie large investor) FFF -fastest finger first
Who am I lending to?
When Savingstream first launched, lenders were effectively lending to Savingstream (Lendy) themselves rather than directly to the borrower. Savingstream would finance the loan with their own resources and then sell the loan to lenders on the market. Savingstream were responsible for paying interest and in the event of default would be expected to repay the loan themselves if they couldnt recover the funds throuh sale of the security. While this system could be seen as less risky as lenders were protected from defaults, it was not 'true' P2P and also meant there was a risk that if Savingstream went bust it would be difficult for lenders to recover their money. In 2015, Savingstream introduced a new structure and terms & conditions where lenders would lend directly to borrowers with Savingstream merely acting as the facilitator & administrator and security would be held by a separate company, Savingstream Security Holdings, to protect lenders. Currently, the loan book is split between old and new structures/T&Cs. See savingstream.co.uk/documents/newstructure.pdf for Savingstream explanation of the key differences between old & new structures. [Note all defaults now accrue interest] Which loans are under which structure is not clearly indicated on the site but roughly they apply to all loans from PBL64 onwards, plus a few that have been converted. See here for an unofficial best estimate of the split.
2016 Lendit Presentation - www.lendit.com/europe/2016/videos/saving-stream-demo
How do I contact Savingstream?
The best way to contact Savingstream is via email support@savingstream.co.uk. They do not offer support by telephone in order to keep costs down so any phonecalls are to a central call centre who will arrange for Savingstream to contact you by email. There is also a contact form on the website and questions relating to specific loans can be asked through the Q&A tab on each loan page. Any (non-phone) queries will receive an automatic acknowledgement of receipt. While Savingstream are quite good at replying in a timely manner not all queries receive a response and may need chasing. Q&A queries will usually be answered by email and not posted on the loan page.
How do I invest in loans?
You can invest either through prefunding a new loan when it launches or buy existing loan parts on the secondary market from lenders selling their holdings. The minimum prefunding amount is £100. The minimum investment is 1p on the secondary market
Do I need to deposit funds before I invest?
You dont have to deposit funds to bid for new loans listed in the Pipeline. Savingstream has a unique funding system, known as Invest Now, Pay Later (INPL) where you can invest in a loan either through Prefunding without having funds available. You then have 48 hours to deposit funds (or sell loans on the secondary market) to clear the negative balance. If you dont clear the balance within the allowed time then the relevant loan parts will be resold by Savingstream. There are limits as to how much INPL you are allowed and persistent failure to fund deficits may be considered abuse and a breach of the site's terms & conditions. INPL is no longer available for purchases made on the Secondary Market so you wont be able to buy exisitng loans without having first deposited the necessary funds into your account
How long do I have to resolve a negative account balance?
Officially, Savingstream allow 24 hours for a negative balance generated by prefunding new loans to be cleared and 48 hours for one created by secondary market purchases. However, these timescales are subject to Savingstream's discretion and while they tend to be generous in their interpretation, it is advisable to clear negative balances as soon as possible. The time limit begins as soon as a negative balance is created and ends when it is fully resolved. If an investment creates a negative balance and subsequent investments increase that negative balance, the total cumulative negative balance needs to be cleared within 24/48hrs from the time of the initial investment, the timer doesnt reset if just the initial negative amount is resolved. Loan parts not paid for within an allowable timeframe will be cancelled and no interest paid.
How long does it take for a deposit/withdrawal to be credited?
In general a deposit sent by Faster Payments should be credited within 24hrs. Normally deposits will be credited the morning of the day after they were sent, including Saturdays. Deposits made over the weekend will usually be credited Monday morning. Savingstream will usually send an email confirmation once a deposit has been credited to a lenders account. The statement entry will normally show the date the deposit was sent not the date it was credited
Withdrawls can only be made if an account has a positive balance and, in most cases, withdrawn funds will be recieved on the same timescales as deposits. Lenders will usually receive an initial email acknowledging the request and a further email once it has been actioned. If a negative balance is generated after the request is made but before it is processed, Savingstream will not action the withdrawl until the negative balance is resolved
Both deposits & withdrawals require manual involvement and therefore these timescales may be affected by staff availability plus any delays caused by banking procedures & checks. Non-faster payments and foreign transactions will be delayed by the longer timescales associated with these.
Only one deposit/withdrawal run is made each day, usually early in the morning, so to have funds avaliable that day funds should be sent/requested before 6am
Where are the primary & secondary markets?
There is only one market on Savingstream which is generally referred to as the secondary market as it shows loans that existing lenders are looking to sell. These can be located under Available loans tab on the site. All new loans can be found under the Pipeline loans tab and can be invested in using prefunding. If new loans arent fully funded through prefunding at launch, then Savingstream will place the remainder onto the secondary market, either in one lump, or by periodically releasing sums over the course of a few days. Any sums placed onto the secondary market by Savingstream will rank behind lender loan parts in the sale queue and will not show in the value of existing queue displayed when lenders go to list loan parts for sale.
What is prefunding? How does it work?
Prefunding is the system by which new loans are allocated to lenders on Savingstream. Each forthcoming loan is listed under the Pipeline loans tab on the Savingstream site. Lenders can then set the amount they wish to invest (min £100) either for individual loans or a default sum for all loans (subject to limits). If the default option is used it is still possible to set a different amount for an individual loan but if the default settings is changed it will apply to all loans and any individual settings will be lost.
Savingstream allocates loans using a 'bottoms up' method. The simplest way to describe this process is that each lender has a pot the size of their prefund. Savingstream distributes the loan amount to each pot in equal increments. When a pot is full it is removed as that lender has received his request in full. The process continues until all pots are full (ie all prefunds satisfied) or there is insuffucient money for every remaining lender to have same sum added to their pot. The remaining sum is released onto the secondary market for any lender to purchase (first come first served). Anyone who placed a large prefund will only get a proportion of their request if the loan is overfunded but the system prevents lenders from over inflating prefunding to get a proportionally larger share, thus preventing abuse a percentage allocation system allows. Savingstream allocate loans to round amounts, nearest £10 normally, rather than allocating to the last avaliable penny, so sometimes the sum released to the Secondary market can be surprisingly large. Once the loan is allocated Savingstream will send an email notifiying the lender how much they have recieved and that they need to fund their account by this sum, either by making a deposit or selling existing holdings, within 24 hours (48 hours acceptable usually) or their allocation will be sold and no interest paid.
Eg If the max allocation before the loan runs out is £1500, anyone requesting £1500 or less will get their full request, anyone requesting more will get £1500.
Are there any limits on prefunding?
Yes. The limit is whichever is greater out of the sum of the lenders existing portfolio plus their cash balance or £10,000. Changes to maximum prefund are not realtime so adding cash to your account would not result in an instant increase in the limits. The current maximum for a lender will be indicated by maximum available in the prefund dropdown menu. Prefunding increases in incremented amounts so limits are rounded down to nearest increment.
How long before a pipeline loan launches on the platform?
Unfortunately there is no real way to judge how long after it is listed in the pipeline a loan will actually launch & go live on the platform. It depends on how long the legal work takes and this can very between loans dependent on their size and complexity. While Savingstream provides a guide to progress by indicating the stage the loan is at in the legal process, loans can rapidly go from an early stage to launch, possibly even appearing to skip several stages. In addition, not all pipeline loans will make it to launch with either Savingstream or the borrower deciding not to proceed. Lenders can prefund a loan at any stage once it appears on the platform and INPL means they do not have to deposit the funds until after launch. Generally, the assignment of a loan identifier (PBL/DFL number) indicates when a loan is due to launch and SS will normally send an email giving 24hr notice of a loan going live. The loan can then launch at any point thereafter but usually within office hours.
What does it mean if a loan is shown as not drawndown?
If a loan isnt drawndown it means the funds havent been released to the borrower. Although Savingstream does most of legal work before it launches the loan on the site, there is always some final checks to be carried out before drawdown. (On a couple of occasions these have resulted in the loan being cancelled before drawdown) Interest is still paid even if the loan hasnt drawndown and Savingstream would cover this themselves if the loan didnt go ahead so investors dont lose out. The actual loan term starts from when the loan launches on the platform not when it is drawndown.
How do I buy loans on the Secondary Market?
ny loans which have availability will be displayed under available loans which is the default page after logging in (It can also be viewed but no purchases made when not logged in by clicking Investments). Available loans which list the loans and how much is avaliable at that moment. You need to have funds in your account in order to purchase loans on the Secondary Market. Click on the loan you wish to invest in, enter the amount in the box and click the I am not a robot box. The system will then decide whether a captcha needs to be solved, solve the captcha and a green tick will appear in the robot box, click to invest and then click to confirm the investment. The system will then confirm the investment providing no aother investor has bought the sum available in the meantime.
What is a captcha? How do I solve it?
A captcha is puzzle designed to prevent automatic programs or 'bots' from carrying out actions on a website - in this case unfairly buying loan parts faster than a human lender would be able. The simplest form of captcha is entering a displayed word or number but Savingstream uses a picture Captcha system comprised of a nine image grid. There a three types of picture Captcha that occur on Savingstream.
Standard picture Captcha - select the images that match the criteria defined eg showing a train.
The regenerating Captcha - as each image matching the criteria is selected, a new image will appear, keep selecting the images matching the criteria until no more qualifying images are displayed
The multi part image Captcha - instead of nine images, only one image is displayed divided into nine, select each part of the grid containing part of the defined criteria eg all squares containing part of a picture of a sign post
The mini 9 - each square shows an indentical image of a nine grid, in the large grid pick the squares corresponding to those squares in the small grid showing the specified image, then click any new squares showing the specified imgae until no more showing. eg mini grid shows mountain top right, centre and bottom middle, so click those locations on large grid, centre reveals a mountain again, so click that, and so on until no mountains showing.
The system will not always require a Captcha to be solved, if the lender only occassionally buys on the Secondary Market, changes browser or 24hrs has elapsed a Captcha is less likely to appear. if lender is very active on the Secondary Market (or gets them wrong) then multiple or harder Captchas may be required.
Why have I only bought part or none of the sum I requested?
If other lenders are trying to buy the same loan parts at the same time, the amount will be allocated to the lender who confirms the purchase first. If there is a smaller sum than requested available at the point a lender confirms the purchase the system will buy what is available even if it is less than requested.
Are there limits on the amount a lender can invest on the Secondary market?
The only limit is the amount of funds available in your account.
How do I sell a loan part on the Secondary market?
Click on the loan you wish to sell from the My Loans list and click on the part to sell. You can sell any amount from 1p to the full value of the loan part. If you wish to sell less than the full part than enter the amount you wish to sell in the box or move the slider to the correct amount, then click sell and confirm. Remeber you wont earn interest from the point the loan part is put up for sale until it sells, unless you cancel the sale.
How long before I can sell a loan part on the Secondary market? (7 day rule)?
There are no restrictions on selling loan parts if your account has a positive balance. If your balance is negative you cannot sell any loan parts invested in/bought that you have held for less than a full 7 days (System appears to calculate from the time of purchase so a part bought at 12pm day 1, would be eligible for sale 12.01 day 8). Resolving a negative balance suspends but does not permanently remove the restriction. So if you bought a loan part A creating a negative balance, sold parts/transferred funds to clear the negative, the sales restriction would be lifted, but if you then bought another loan part B creating a new negative balance you would again not be able to sell loan part A. Loan parts that cant be sold do not display the 'sell loan part' option. This 7 day rule was introduced to prevent lenders earning 'free' interest by 'flippin' loan parts.
How do I see the existing sale queue and where my loan part is in the queue?
The size of the existing queue is displayed above the box where you enter the amount to sell. Normally this will be same as the sum shown on the available loans page but sometimes where a loan hasnt filled immediately after launch or Saving stream has released unpaid for parts back onto the market there will be a shorter or even no queue. This is because parts being sold by lenders are always ahead of any SavingStream parts in the queue. Therefore even if the queue looks huge it is worth checking as they may actually be no queue at all.
To see how far your parts have progressed in the queue, click on Selling loan parts under Your loans, click on the relevant loan and it will display the loan parts and the value ahead of them in the queue
How do I cancel a loan part available for sale? Why cant I cancel a loan part sale?
Click on Selling loan parts under Your loans, click on the relevant loan and it will display the loan parts currently for sale, click on the cancel button. Cancelling a loan part means that an interest that would normal have been earnt over the period it was avaliable for sale is reassigned to that part and will be paid as normal at month end. If a only part of a loan part has been offered for sale, cancelled part will form a new loan part, it is not amalgamated with the part not offered for sale.
You can only cancel a loan part if it is 100% unsold. If a partial sale has been made the cancel button will not be displayed. You can buy the remainder of the loan part yourself to cancel the sale but you will not reciece any interest for the period the part was on sale.
How is interest calculated?
No interest is earnt on available funds, only on funds invested in loans. Interest accrues on a daily basis at midnight. Interest accrued for a day equals loan amount*1/365*12%, so for a £1000 loan held for a whole 30 day month is £1000*0.12 /365 *30. The actual payment for each month will therefore vary depending on the number of days in the month. There is no increased rate payable on defaulted loans.
When is interest paid?
For loans not in arrears, interest is calculated up to the last day of the month and actually paid on the first day of the next calendar month (or possibly the next working day). It is a manual process so will be credited during the course of that day. Interest entry in the transaction statement is dated the last day of the month. The treatment of non-drawndown loans is the same as drawndown loans.
Where a loan part is sold on the Secondary Market, interest accrues from the last day of the previous month up to the date the loan part is listed for sale, but is not paid until the end of the month in which the loan part is listed for sale. The buyer accrues interest from the date of purchase.
When a loan is repaid or cancelled before drawdown, any interest accrued since the last payment is paid at the end of the month at the same time as standard interest payments
When a loan is rolled over into a new loan (usually PBL into a DFL) interest accrued on the old loan will be paid at the end of the month as normal.
Where a loan is in arrears, for the first 90 days overdue will be paid at normal time by Savingstream.
Where a loan becomes more than 90 days in arrears interest will begining to accrue until either the borrower makes a payment sufficent to cover interest for the full overdue period or sufficient funds are secured from realisation of the security after recovery procedures.
Where a loan moves from paying to accruing during a month, interest will be paid to cover the period up to the point it changed status and the payment entry will be entered into the statement on the date the status changed.
Is interested paid if I cancel a loan part offered for sale?
Yes. Although no interest is earnt on loan parts that sell, if a lender subsequently cancels that for sale listing, then any interest that would have been earnt while the part was listed for sale will be
paid as normal at the end of the month. See here.
The cancelled part will be treated a new loan part, so in cases where only part of a holding was listed for sale the statement will show two interest payments.
Following sections are being rewritten to reflect recent changes
What happens when a loan isnt repaid on time? Who decides this?
New procedures will be introduced from 1 March with clear definition of defaults and who is paying interest
[Warning: the following is an interpretation, in places speculative and for the avoidance of doubt lenders should contact Saving Stream for the exact circumstances applying to an individual loan]
Normally a loan should be repaid when it reaches its agreed term, however, in the case of bridging finance as offered by Saving Stream this is actually surprisingly rare. Therefore Saving Stream will usually agree to extend the loan for a period to allow the borrower time to repay/refinance. Where the extension is for a set period the borrower will pay interest upfront and the new term should be reflected on the site as days remaining [NB this may not be accurate] and is usually indicated in that loan's updates. In other cases, Savingstream provides a rolling extension with the borrowing paying interest on a monthly basis, possibly in arrears, and may be indicated in loan updates. It appears that loans with negative terms indicate interest paid on a rolling or ad hoc basis.Saving Stream have stated that borrowers pay interest on all extended loans (except where there is clear evidence of imminent repayment/strong security) and failure to do so will result in loans being defaulted. Interest on negative day loans may be covered by Saving Stream from platform resources. This recovered when the borrower pays the interest & the loan is formally extended. Borrowers pay additional fees and possibly a higher interest rate for extensions but lenders do not receive an increased rate.
All decisions on how to handle loans at term and provide extensions or default are made by Saving Stream as stated in the T&Cs. There are no lender votes like on some platforms. Lenders who wish to exit a loan that has been extended can do so via the Secondary market as usual
How is a default defined?
Under Savingstreams new policy a default is defined as either:
Failure to pay the redemption figure within a Tolerance Period of 180 days from the repayment date
Borrower is unable to provide clarity on how the loan will be repaid within the Tolerance Period
A loan will be automatically defaulted once the remaining term has exceeded the Tolerance Period (ie more than -180 days) but may be defaulted at any time during the Tolerance Period.
In some circumstances, Savingstream may decide not to default a loan outside of the Tolerance Period or remove a loan from default status. Such exceptions will be made by a Credit Committee comprising any three of: Head of Legal; Head of Leading; Head of Credit; a director, and only if the borrower provides 'persuasive evidence' of a viable exit strategy.
Savingstream define a default as "[when] we are no longer confident of when or how the borrower is going to repay the loan." In these circumstances they will default the loan and appoint a receiver to recover the security, 'often on the back of discussions with the borrower, purchasers and our advisors. We consider it one of many tools available to us'
'Instructing the receiver is a way of forcing a situation i.e when we decide an offer is acceptable but might not be acceptable to a borrower and need to control the sale to make it happen in a timely fashion'
What happens if the borrower doesnt pay the interest?
New procedures will apply from 1 Mar
When Savingstream loans money to a borrower the amount loaned includes an amount to cover the interest payments to lenders over the term of the loan. This portion of the loan is retained by Savingstream in a seperate Client account and is paid the lenders as each interest payment is due. There is therefore limited risk that the borrower wont pay the interest. When the loan reaches its term, if the borrower needs an extension Savingstream will usually only extend the loan if the borrower pays the interest for the extension upfront but lenders should see the updates on each individual loan for specific details. If a loan reaches its term and borrower is not able to cover interest for an extension then the loan is likely to default. In the event of a default interest will cease to be paid monthly and instead will accrue. Interest would have to be recovered from sale of the asset security and in the event of insufficient funds recovered may not be paid or only paid in part. [NB Several loans have been shown with an apparently incorrect initial term which means retained interest would not cover the full term shown - see here]
What is a Property Bridging Loan (PBL)?
A Property Bridging Loan is a short term loan generally for a maximum of 12 months secured against property/land to allow a borrower to secure long term finance, enhance value or sell an asset. The loan to value (LTV) is calculated on the value of the security when the loan is made. Some bridging loans are provided to enable borrowers to enhance the value of an asset by securing planning or building on land before securing long term finance or selling but this potential enhanced value is not usually included in the LTV.
What is a Development Finance Loan (DFL)?
A Development Finance Loan is a loan to undertake a construction project. Unlike a bridging loan where the Loan to Value (LTV) is calculated on the current value of the security when the loan is made, for a DFL the LTV (LTGDV) is calculated against the future value, known as the Gross Development Value (GDV), of the security once the project is complete. Normally, in order to reduce the risk to lenders should a project suffer problems or fail, DFL are drawndown in tranches. The release of each tranche of funds is controlled by a surveyor, known as a Monitoring Surveyor, who assesses if the work completed to date is of sufficient value to allow further funds to be provided. The value of a project will fluctuate over the course of the project, diminishing as work is completed but jumping up immediately a new tranche of funds is released, but should also not exceed a maximum agreed loan to GDV over the course of the loan. However, the risk associated with an incomplete project can be higher than indicated by the LTGDV as if left unfinished the cost of completion by a different party may be higher than existing estimates. DFLs are displayed on the site with the details for the full facility, value at completion & LTGDV so current loan, valuation and realtime LTV are likely to be different. See here for Savingstreams explanation. Savingstream have provided further guidance on DFLs here.
Unilateral Notices?
See here for SS explanation.
How do I rollover an existing investment into a DFL? (no longer in use it appears)
In cases where an existing Property Bridging Loan is refinanced as a Development Loan, Savingstream will roll existing investor funds from the PBL directly into the DFL (mandatory). If existing investors just want to move their current holdings and not invest additional funds into the DFL then prefunding should be set to zero (£0). If they wish to increase their investment, then prefunding should be set to the additional amount. Any additional requests will be allocated as per usual prefunding rules so lenders may received part or all of any additional request plus their original investment. Outstanding accrued interest on the original loan is paid at the end of the month.
What if I dont want to rollover all or any of my existing holdings?
Any investors not wanting to invest in the new DFL loan or reduce their holding can sell the unwanted sum in the original loan on the secondary market prior to launch of the DFL. If it hasnt sold by the time the rollover occurs Savingstream have on previous occasions redeemed all outstanding sums on the secondary market and reallocated them to new lenders in the DFL/placed them as unallocated sums on the secondary market. [NB There is no guarentee they will do this] Alternatively unwanted sums can be sold on the secondary market after the rollover as normal. Outstanding accrued interest on the original loan is paid at the end of the month.
How will subsequent tranches of a DFL be launched?
What does it mean if a loan shows a negative remaining period?
New procedures from 1 Mar
Each loan shows the length of time remaining in its term or, in some cases, after an extension. A negative value means that the loan has gone beyond its original term (or in some cases an extension). While the loan could be in default, generally this is not the case as normally the borrower is making interest payment to cover an extension. Details of the current situation can be found in Savingstream update emails, the recent update tab on the individual loan page and a record is kept on these forums here. In normal circumstances, interest is paid as usual, this maybe by Savinstream out of platform resources, and the loans are tradeable on the secondary market. See below for defaulted loans. [Caution is advised when considering length of term remaining as there have been a few loans where the initial term has appeared to be shown incorrectly - see here]
Is interest still paid if a loan defaults? Will a defaulted loan still be tradeable on the secondary market?
In the event of a default interest will accrue until recovery is achieved through a sale of the asset. Payment of accrued interest is dependent on sufficient sums being realised from the sale of the asset.
Currently all defaulted loans will continue to be tradeable on the secondary market. See here for Savingstream explanation of the key differences between old & new terms & conditions [NB Interest will now accrue on all defaults]
Have Savingstream had any defaults? Have lenders lost any money?
Currently no lenders have lost any money as a result of defaults. To date there have been four defaults. Two boat loans, one recovered in full following the sale of the asset, and another which Lendy repaid themselves (subsequently recovering through a replacement property loan), both within a short period. There have been two property defaults, one which was recovered in full through sale of the asset after three months, and another where recovery is in progress. All these loans remained tradeable on the secondary market and in the earlier defaults continued to repay interest where applicable. The latest and subsequent defaults will only pay interest on recovery of sufficient funds from the sale of the assets.
Does Savingstream have a Provision Fund?
Yes. Savingstream operates a voluntary, discretionary provision fund. The fund is maintained by Lendy from their fees and has a minimum balance equal to 2% of the live loan book, with the actual value tending to fluctuate as loans launch and repay. Savingstream have indicated that they would replenish the fund to 2% level in the event it had to make a pay out. The fund is managed by Lendy Provision Reserve Ltd, a separate company but with the same directors as Lendy. In the event of a default, if Savingstream are unable to recover sufficient funds through disposal of the security, lenders can apply to the provision fund for compensation for any losses to their capital. The provision fund is not obligated to pay out and may not be able to cover all losses. See here for details of the provision fund (Figures are updated periodically and may not be accurate)
Will Savingstream be offering an Innovative Finance ISA (IFISA)
Savingstream have indicated they will be offer an IFISA at some point but are currently waiting for permission from the regulator (FCA) for this. In order to offer ISAs platforms are required to have full authorisation from the FCA and there have been delays to authorising most platforms. Saving Stream applied in Q1 2016 and have indicated that the process may take up to a year.
Risk analysis by solicitorious
Frequently Asked Questions (Being updated to reflect new procedures)
Disclaimer: Nothing contained below constitutes financial advice and no warranty is offered for its accuracy. Note that these answers are a personal interpretation, are not official & may not be definitive as platforms evolve. Its always best to ask Savingstream directly if unsure and consult a IFA if advice is required before investing. I am not a financial professional.
Common abbreviations: SS - SavingStream, SM - Secondary Market, PF - Pre-Funding (or Provision Fund subject to context) PM - Primary Market, LTV - Loan to Value (ie loan/security value as percentage), PBL - Property Bridging Loan (sometimes pebble), DFL - Development Finance Loan, INPL - Invest Now, Pay Later, BH - Big Hitter (ie large investor) FFF -fastest finger first
Who am I lending to?
When Savingstream first launched, lenders were effectively lending to Savingstream (Lendy) themselves rather than directly to the borrower. Savingstream would finance the loan with their own resources and then sell the loan to lenders on the market. Savingstream were responsible for paying interest and in the event of default would be expected to repay the loan themselves if they couldnt recover the funds throuh sale of the security. While this system could be seen as less risky as lenders were protected from defaults, it was not 'true' P2P and also meant there was a risk that if Savingstream went bust it would be difficult for lenders to recover their money. In 2015, Savingstream introduced a new structure and terms & conditions where lenders would lend directly to borrowers with Savingstream merely acting as the facilitator & administrator and security would be held by a separate company, Savingstream Security Holdings, to protect lenders. Currently, the loan book is split between old and new structures/T&Cs. See savingstream.co.uk/documents/newstructure.pdf for Savingstream explanation of the key differences between old & new structures. [Note all defaults now accrue interest] Which loans are under which structure is not clearly indicated on the site but roughly they apply to all loans from PBL64 onwards, plus a few that have been converted. See here for an unofficial best estimate of the split.
2016 Lendit Presentation - www.lendit.com/europe/2016/videos/saving-stream-demo
How do I contact Savingstream?
The best way to contact Savingstream is via email support@savingstream.co.uk. They do not offer support by telephone in order to keep costs down so any phonecalls are to a central call centre who will arrange for Savingstream to contact you by email. There is also a contact form on the website and questions relating to specific loans can be asked through the Q&A tab on each loan page. Any (non-phone) queries will receive an automatic acknowledgement of receipt. While Savingstream are quite good at replying in a timely manner not all queries receive a response and may need chasing. Q&A queries will usually be answered by email and not posted on the loan page.
How do I invest in loans?
You can invest either through prefunding a new loan when it launches or buy existing loan parts on the secondary market from lenders selling their holdings. The minimum prefunding amount is £100. The minimum investment is 1p on the secondary market
Do I need to deposit funds before I invest?
You dont have to deposit funds to bid for new loans listed in the Pipeline. Savingstream has a unique funding system, known as Invest Now, Pay Later (INPL) where you can invest in a loan either through Prefunding without having funds available. You then have 48 hours to deposit funds (or sell loans on the secondary market) to clear the negative balance. If you dont clear the balance within the allowed time then the relevant loan parts will be resold by Savingstream. There are limits as to how much INPL you are allowed and persistent failure to fund deficits may be considered abuse and a breach of the site's terms & conditions. INPL is no longer available for purchases made on the Secondary Market so you wont be able to buy exisitng loans without having first deposited the necessary funds into your account
How long do I have to resolve a negative account balance?
Officially, Savingstream allow 24 hours for a negative balance generated by prefunding new loans to be cleared and 48 hours for one created by secondary market purchases. However, these timescales are subject to Savingstream's discretion and while they tend to be generous in their interpretation, it is advisable to clear negative balances as soon as possible. The time limit begins as soon as a negative balance is created and ends when it is fully resolved. If an investment creates a negative balance and subsequent investments increase that negative balance, the total cumulative negative balance needs to be cleared within 24/48hrs from the time of the initial investment, the timer doesnt reset if just the initial negative amount is resolved. Loan parts not paid for within an allowable timeframe will be cancelled and no interest paid.
How long does it take for a deposit/withdrawal to be credited?
In general a deposit sent by Faster Payments should be credited within 24hrs. Normally deposits will be credited the morning of the day after they were sent, including Saturdays. Deposits made over the weekend will usually be credited Monday morning. Savingstream will usually send an email confirmation once a deposit has been credited to a lenders account. The statement entry will normally show the date the deposit was sent not the date it was credited
Withdrawls can only be made if an account has a positive balance and, in most cases, withdrawn funds will be recieved on the same timescales as deposits. Lenders will usually receive an initial email acknowledging the request and a further email once it has been actioned. If a negative balance is generated after the request is made but before it is processed, Savingstream will not action the withdrawl until the negative balance is resolved
Both deposits & withdrawals require manual involvement and therefore these timescales may be affected by staff availability plus any delays caused by banking procedures & checks. Non-faster payments and foreign transactions will be delayed by the longer timescales associated with these.
Only one deposit/withdrawal run is made each day, usually early in the morning, so to have funds avaliable that day funds should be sent/requested before 6am
Where are the primary & secondary markets?
There is only one market on Savingstream which is generally referred to as the secondary market as it shows loans that existing lenders are looking to sell. These can be located under Available loans tab on the site. All new loans can be found under the Pipeline loans tab and can be invested in using prefunding. If new loans arent fully funded through prefunding at launch, then Savingstream will place the remainder onto the secondary market, either in one lump, or by periodically releasing sums over the course of a few days. Any sums placed onto the secondary market by Savingstream will rank behind lender loan parts in the sale queue and will not show in the value of existing queue displayed when lenders go to list loan parts for sale.
What is prefunding? How does it work?
Prefunding is the system by which new loans are allocated to lenders on Savingstream. Each forthcoming loan is listed under the Pipeline loans tab on the Savingstream site. Lenders can then set the amount they wish to invest (min £100) either for individual loans or a default sum for all loans (subject to limits). If the default option is used it is still possible to set a different amount for an individual loan but if the default settings is changed it will apply to all loans and any individual settings will be lost.
Savingstream allocates loans using a 'bottoms up' method. The simplest way to describe this process is that each lender has a pot the size of their prefund. Savingstream distributes the loan amount to each pot in equal increments. When a pot is full it is removed as that lender has received his request in full. The process continues until all pots are full (ie all prefunds satisfied) or there is insuffucient money for every remaining lender to have same sum added to their pot. The remaining sum is released onto the secondary market for any lender to purchase (first come first served). Anyone who placed a large prefund will only get a proportion of their request if the loan is overfunded but the system prevents lenders from over inflating prefunding to get a proportionally larger share, thus preventing abuse a percentage allocation system allows. Savingstream allocate loans to round amounts, nearest £10 normally, rather than allocating to the last avaliable penny, so sometimes the sum released to the Secondary market can be surprisingly large. Once the loan is allocated Savingstream will send an email notifiying the lender how much they have recieved and that they need to fund their account by this sum, either by making a deposit or selling existing holdings, within 24 hours (48 hours acceptable usually) or their allocation will be sold and no interest paid.
Eg If the max allocation before the loan runs out is £1500, anyone requesting £1500 or less will get their full request, anyone requesting more will get £1500.
Are there any limits on prefunding?
Yes. The limit is whichever is greater out of the sum of the lenders existing portfolio plus their cash balance or £10,000. Changes to maximum prefund are not realtime so adding cash to your account would not result in an instant increase in the limits. The current maximum for a lender will be indicated by maximum available in the prefund dropdown menu. Prefunding increases in incremented amounts so limits are rounded down to nearest increment.
How long before a pipeline loan launches on the platform?
Unfortunately there is no real way to judge how long after it is listed in the pipeline a loan will actually launch & go live on the platform. It depends on how long the legal work takes and this can very between loans dependent on their size and complexity. While Savingstream provides a guide to progress by indicating the stage the loan is at in the legal process, loans can rapidly go from an early stage to launch, possibly even appearing to skip several stages. In addition, not all pipeline loans will make it to launch with either Savingstream or the borrower deciding not to proceed. Lenders can prefund a loan at any stage once it appears on the platform and INPL means they do not have to deposit the funds until after launch. Generally, the assignment of a loan identifier (PBL/DFL number) indicates when a loan is due to launch and SS will normally send an email giving 24hr notice of a loan going live. The loan can then launch at any point thereafter but usually within office hours.
What does it mean if a loan is shown as not drawndown?
If a loan isnt drawndown it means the funds havent been released to the borrower. Although Savingstream does most of legal work before it launches the loan on the site, there is always some final checks to be carried out before drawdown. (On a couple of occasions these have resulted in the loan being cancelled before drawdown) Interest is still paid even if the loan hasnt drawndown and Savingstream would cover this themselves if the loan didnt go ahead so investors dont lose out. The actual loan term starts from when the loan launches on the platform not when it is drawndown.
How do I buy loans on the Secondary Market?
ny loans which have availability will be displayed under available loans which is the default page after logging in (It can also be viewed but no purchases made when not logged in by clicking Investments). Available loans which list the loans and how much is avaliable at that moment. You need to have funds in your account in order to purchase loans on the Secondary Market. Click on the loan you wish to invest in, enter the amount in the box and click the I am not a robot box. The system will then decide whether a captcha needs to be solved, solve the captcha and a green tick will appear in the robot box, click to invest and then click to confirm the investment. The system will then confirm the investment providing no aother investor has bought the sum available in the meantime.
What is a captcha? How do I solve it?
A captcha is puzzle designed to prevent automatic programs or 'bots' from carrying out actions on a website - in this case unfairly buying loan parts faster than a human lender would be able. The simplest form of captcha is entering a displayed word or number but Savingstream uses a picture Captcha system comprised of a nine image grid. There a three types of picture Captcha that occur on Savingstream.
Standard picture Captcha - select the images that match the criteria defined eg showing a train.
The regenerating Captcha - as each image matching the criteria is selected, a new image will appear, keep selecting the images matching the criteria until no more qualifying images are displayed
The multi part image Captcha - instead of nine images, only one image is displayed divided into nine, select each part of the grid containing part of the defined criteria eg all squares containing part of a picture of a sign post
The mini 9 - each square shows an indentical image of a nine grid, in the large grid pick the squares corresponding to those squares in the small grid showing the specified image, then click any new squares showing the specified imgae until no more showing. eg mini grid shows mountain top right, centre and bottom middle, so click those locations on large grid, centre reveals a mountain again, so click that, and so on until no mountains showing.
The system will not always require a Captcha to be solved, if the lender only occassionally buys on the Secondary Market, changes browser or 24hrs has elapsed a Captcha is less likely to appear. if lender is very active on the Secondary Market (or gets them wrong) then multiple or harder Captchas may be required.
Why have I only bought part or none of the sum I requested?
If other lenders are trying to buy the same loan parts at the same time, the amount will be allocated to the lender who confirms the purchase first. If there is a smaller sum than requested available at the point a lender confirms the purchase the system will buy what is available even if it is less than requested.
Are there limits on the amount a lender can invest on the Secondary market?
The only limit is the amount of funds available in your account.
How do I sell a loan part on the Secondary market?
Click on the loan you wish to sell from the My Loans list and click on the part to sell. You can sell any amount from 1p to the full value of the loan part. If you wish to sell less than the full part than enter the amount you wish to sell in the box or move the slider to the correct amount, then click sell and confirm. Remeber you wont earn interest from the point the loan part is put up for sale until it sells, unless you cancel the sale.
How long before I can sell a loan part on the Secondary market? (7 day rule)?
There are no restrictions on selling loan parts if your account has a positive balance. If your balance is negative you cannot sell any loan parts invested in/bought that you have held for less than a full 7 days (System appears to calculate from the time of purchase so a part bought at 12pm day 1, would be eligible for sale 12.01 day 8). Resolving a negative balance suspends but does not permanently remove the restriction. So if you bought a loan part A creating a negative balance, sold parts/transferred funds to clear the negative, the sales restriction would be lifted, but if you then bought another loan part B creating a new negative balance you would again not be able to sell loan part A. Loan parts that cant be sold do not display the 'sell loan part' option. This 7 day rule was introduced to prevent lenders earning 'free' interest by 'flippin' loan parts.
How do I see the existing sale queue and where my loan part is in the queue?
The size of the existing queue is displayed above the box where you enter the amount to sell. Normally this will be same as the sum shown on the available loans page but sometimes where a loan hasnt filled immediately after launch or Saving stream has released unpaid for parts back onto the market there will be a shorter or even no queue. This is because parts being sold by lenders are always ahead of any SavingStream parts in the queue. Therefore even if the queue looks huge it is worth checking as they may actually be no queue at all.
To see how far your parts have progressed in the queue, click on Selling loan parts under Your loans, click on the relevant loan and it will display the loan parts and the value ahead of them in the queue
How do I cancel a loan part available for sale? Why cant I cancel a loan part sale?
Click on Selling loan parts under Your loans, click on the relevant loan and it will display the loan parts currently for sale, click on the cancel button. Cancelling a loan part means that an interest that would normal have been earnt over the period it was avaliable for sale is reassigned to that part and will be paid as normal at month end. If a only part of a loan part has been offered for sale, cancelled part will form a new loan part, it is not amalgamated with the part not offered for sale.
You can only cancel a loan part if it is 100% unsold. If a partial sale has been made the cancel button will not be displayed. You can buy the remainder of the loan part yourself to cancel the sale but you will not reciece any interest for the period the part was on sale.
How is interest calculated?
No interest is earnt on available funds, only on funds invested in loans. Interest accrues on a daily basis at midnight. Interest accrued for a day equals loan amount*1/365*12%, so for a £1000 loan held for a whole 30 day month is £1000*0.12 /365 *30. The actual payment for each month will therefore vary depending on the number of days in the month. There is no increased rate payable on defaulted loans.
When is interest paid?
For loans not in arrears, interest is calculated up to the last day of the month and actually paid on the first day of the next calendar month (or possibly the next working day). It is a manual process so will be credited during the course of that day. Interest entry in the transaction statement is dated the last day of the month. The treatment of non-drawndown loans is the same as drawndown loans.
Where a loan part is sold on the Secondary Market, interest accrues from the last day of the previous month up to the date the loan part is listed for sale, but is not paid until the end of the month in which the loan part is listed for sale. The buyer accrues interest from the date of purchase.
When a loan is repaid or cancelled before drawdown, any interest accrued since the last payment is paid at the end of the month at the same time as standard interest payments
When a loan is rolled over into a new loan (usually PBL into a DFL) interest accrued on the old loan will be paid at the end of the month as normal.
Where a loan is in arrears, for the first 90 days overdue will be paid at normal time by Savingstream.
Where a loan becomes more than 90 days in arrears interest will begining to accrue until either the borrower makes a payment sufficent to cover interest for the full overdue period or sufficient funds are secured from realisation of the security after recovery procedures.
Where a loan moves from paying to accruing during a month, interest will be paid to cover the period up to the point it changed status and the payment entry will be entered into the statement on the date the status changed.
Is interested paid if I cancel a loan part offered for sale?
Yes. Although no interest is earnt on loan parts that sell, if a lender subsequently cancels that for sale listing, then any interest that would have been earnt while the part was listed for sale will be
paid as normal at the end of the month. See here.
The cancelled part will be treated a new loan part, so in cases where only part of a holding was listed for sale the statement will show two interest payments.
Following sections are being rewritten to reflect recent changes
What happens when a loan isnt repaid on time? Who decides this?
New procedures will be introduced from 1 March with clear definition of defaults and who is paying interest
[Warning: the following is an interpretation, in places speculative and for the avoidance of doubt lenders should contact Saving Stream for the exact circumstances applying to an individual loan]
Normally a loan should be repaid when it reaches its agreed term, however, in the case of bridging finance as offered by Saving Stream this is actually surprisingly rare. Therefore Saving Stream will usually agree to extend the loan for a period to allow the borrower time to repay/refinance. Where the extension is for a set period the borrower will pay interest upfront and the new term should be reflected on the site as days remaining [NB this may not be accurate] and is usually indicated in that loan's updates. In other cases, Savingstream provides a rolling extension with the borrowing paying interest on a monthly basis, possibly in arrears, and may be indicated in loan updates. It appears that loans with negative terms indicate interest paid on a rolling or ad hoc basis.
All decisions on how to handle loans at term and provide extensions or default are made by Saving Stream as stated in the T&Cs. There are no lender votes like on some platforms. Lenders who wish to exit a loan that has been extended can do so via the Secondary market as usual
How is a default defined?
Under Savingstreams new policy a default is defined as either:
Failure to pay the redemption figure within a Tolerance Period of 180 days from the repayment date
Borrower is unable to provide clarity on how the loan will be repaid within the Tolerance Period
A loan will be automatically defaulted once the remaining term has exceeded the Tolerance Period (ie more than -180 days) but may be defaulted at any time during the Tolerance Period.
In some circumstances, Savingstream may decide not to default a loan outside of the Tolerance Period or remove a loan from default status. Such exceptions will be made by a Credit Committee comprising any three of: Head of Legal; Head of Leading; Head of Credit; a director, and only if the borrower provides 'persuasive evidence' of a viable exit strategy.
Savingstream define a default as "[when] we are no longer confident of when or how the borrower is going to repay the loan." In these circumstances they will default the loan and appoint a receiver to recover the security, 'often on the back of discussions with the borrower, purchasers and our advisors. We consider it one of many tools available to us'
'Instructing the receiver is a way of forcing a situation i.e when we decide an offer is acceptable but might not be acceptable to a borrower and need to control the sale to make it happen in a timely fashion'
What happens if the borrower doesnt pay the interest?
New procedures will apply from 1 Mar
When Savingstream loans money to a borrower the amount loaned includes an amount to cover the interest payments to lenders over the term of the loan. This portion of the loan is retained by Savingstream in a seperate Client account and is paid the lenders as each interest payment is due. There is therefore limited risk that the borrower wont pay the interest. When the loan reaches its term, if the borrower needs an extension Savingstream will usually only extend the loan if the borrower pays the interest for the extension upfront but lenders should see the updates on each individual loan for specific details. If a loan reaches its term and borrower is not able to cover interest for an extension then the loan is likely to default. In the event of a default interest will cease to be paid monthly and instead will accrue. Interest would have to be recovered from sale of the asset security and in the event of insufficient funds recovered may not be paid or only paid in part. [NB Several loans have been shown with an apparently incorrect initial term which means retained interest would not cover the full term shown - see here]
What is a Property Bridging Loan (PBL)?
A Property Bridging Loan is a short term loan generally for a maximum of 12 months secured against property/land to allow a borrower to secure long term finance, enhance value or sell an asset. The loan to value (LTV) is calculated on the value of the security when the loan is made. Some bridging loans are provided to enable borrowers to enhance the value of an asset by securing planning or building on land before securing long term finance or selling but this potential enhanced value is not usually included in the LTV.
What is a Development Finance Loan (DFL)?
A Development Finance Loan is a loan to undertake a construction project. Unlike a bridging loan where the Loan to Value (LTV) is calculated on the current value of the security when the loan is made, for a DFL the LTV (LTGDV) is calculated against the future value, known as the Gross Development Value (GDV), of the security once the project is complete. Normally, in order to reduce the risk to lenders should a project suffer problems or fail, DFL are drawndown in tranches. The release of each tranche of funds is controlled by a surveyor, known as a Monitoring Surveyor, who assesses if the work completed to date is of sufficient value to allow further funds to be provided. The value of a project will fluctuate over the course of the project, diminishing as work is completed but jumping up immediately a new tranche of funds is released, but should also not exceed a maximum agreed loan to GDV over the course of the loan. However, the risk associated with an incomplete project can be higher than indicated by the LTGDV as if left unfinished the cost of completion by a different party may be higher than existing estimates. DFLs are displayed on the site with the details for the full facility, value at completion & LTGDV so current loan, valuation and realtime LTV are likely to be different. See here for Savingstreams explanation. Savingstream have provided further guidance on DFLs here.
Unilateral Notices?
See here for SS explanation.
What if I dont want to rollover all or any of my existing holdings?
Any investors not wanting to invest in the new DFL loan or reduce their holding can sell the unwanted sum in the original loan on the secondary market prior to launch of the DFL. If it hasnt sold by the time the rollover occurs Savingstream have on previous occasions redeemed all outstanding sums on the secondary market and reallocated them to new lenders in the DFL/placed them as unallocated sums on the secondary market. [NB There is no guarentee they will do this] Alternatively unwanted sums can be sold on the secondary market after the rollover as normal. Outstanding accrued interest on the original loan is paid at the end of the month.
How will subsequent tranches of a DFL be launched?
What does it mean if a loan shows a negative remaining period?
New procedures from 1 Mar
Each loan shows the length of time remaining in its term or, in some cases, after an extension. A negative value means that the loan has gone beyond its original term (or in some cases an extension). While the loan could be in default, generally this is not the case as normally the borrower is making interest payment to cover an extension. Details of the current situation can be found in Savingstream update emails, the recent update tab on the individual loan page and a record is kept on these forums here. In normal circumstances, interest is paid as usual, this maybe by Savinstream out of platform resources, and the loans are tradeable on the secondary market. See below for defaulted loans. [Caution is advised when considering length of term remaining as there have been a few loans where the initial term has appeared to be shown incorrectly - see here]
Is interest still paid if a loan defaults? Will a defaulted loan still be tradeable on the secondary market?
In the event of a default interest will accrue until recovery is achieved through a sale of the asset. Payment of accrued interest is dependent on sufficient sums being realised from the sale of the asset.
Currently all defaulted loans will continue to be tradeable on the secondary market. See here for Savingstream explanation of the key differences between old & new terms & conditions [NB Interest will now accrue on all defaults]
Have Savingstream had any defaults? Have lenders lost any money?
Currently no lenders have lost any money as a result of defaults. To date there have been four defaults. Two boat loans, one recovered in full following the sale of the asset, and another which Lendy repaid themselves (subsequently recovering through a replacement property loan), both within a short period. There have been two property defaults, one which was recovered in full through sale of the asset after three months, and another where recovery is in progress. All these loans remained tradeable on the secondary market and in the earlier defaults continued to repay interest where applicable. The latest and subsequent defaults will only pay interest on recovery of sufficient funds from the sale of the assets.
Does Savingstream have a Provision Fund?
Yes. Savingstream operates a voluntary, discretionary provision fund. The fund is maintained by Lendy from their fees and has a minimum balance equal to 2% of the live loan book, with the actual value tending to fluctuate as loans launch and repay. Savingstream have indicated that they would replenish the fund to 2% level in the event it had to make a pay out. The fund is managed by Lendy Provision Reserve Ltd, a separate company but with the same directors as Lendy. In the event of a default, if Savingstream are unable to recover sufficient funds through disposal of the security, lenders can apply to the provision fund for compensation for any losses to their capital. The provision fund is not obligated to pay out and may not be able to cover all losses. See here for details of the provision fund (Figures are updated periodically and may not be accurate)
Will Savingstream be offering an Innovative Finance ISA (IFISA)
Savingstream have indicated they will be offer an IFISA at some point but are currently waiting for permission from the regulator (FCA) for this. In order to offer ISAs platforms are required to have full authorisation from the FCA and there have been delays to authorising most platforms. Saving Stream applied in Q1 2016 and have indicated that the process may take up to a year.
Risk analysis by solicitorious
Disclaimer: No warranty whatsoever is given to the accuracy or usefulness of this data, although I refer to it all the time. You should only accept financial advice from a qualified Financial Advisor, which I'm not.
LTV analysis. The critical effect of the provision fund in the case of single loan failure. I do try to update this as soon as there's a new loan.
docs.google.com/spreadsheets/d/1GYdLhGJ6c6K1YeyTPJdD0doOaYeRK_rjt8baywxRaaE/edit?usp=sharing
Monte Carlo analysis. A simulation of multiple loan failure. I'll try and update this in the near future, and maybe every six months thereafter.
p2pindependentforum.com/thread/3348/monte-carlo-simulation-losses
LTV analysis. The critical effect of the provision fund in the case of single loan failure. I do try to update this as soon as there's a new loan.
docs.google.com/spreadsheets/d/1GYdLhGJ6c6K1YeyTPJdD0doOaYeRK_rjt8baywxRaaE/edit?usp=sharing
Monte Carlo analysis. A simulation of multiple loan failure. I'll try and update this in the near future, and maybe every six months thereafter.
p2pindependentforum.com/thread/3348/monte-carlo-simulation-losses
