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Post by profunder on Mar 22, 2016 17:59:56 GMT
It maybe just a difference of base expectation, but maybe not.
So the hotel is speculative, but always happy when the borrower is putting some of their own money on the line.
I am happy generally to yield about 8%, so if I'm lending at 12% over 6 months I can take a loss rate of about 2%. That's 10% default rate with 80% recovery. If the APR is 16% I can afford double the losses.
The overall loss rate on property is low, default rate is high but normally 100% recovery - although we yet to really see how funding secure perform.
What I do like about property is that its actually quite easy to dispose of in an auction, I would expect virtually all loans to be settled 9 months after initial default.
If anyone thinks you can get 12% without risk, I doubt that's true. But if you go in expecting a 2% loss rate on every loan, I doubt you will be disappointed.
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Post by mrclondon on Mar 26, 2016 18:28:37 GMT
After reading through the details of all 9 of the currently available loans (all property), I've come to the conclusion that FS is becoming too heavily biased towards the riskier end of property lending. Eight of the nine are under priced for risk IMO, with just the one at 11% (again IMO) more accurately reflecting the risk.
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hendragon
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Post by hendragon on Mar 26, 2016 20:07:00 GMT
I can't quite understand the timing of all this. FS have been fairly consistent with their flow of loans until this deluge of property loans. Why now, and why all at once?
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SteveT
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Post by SteveT on Mar 27, 2016 9:23:03 GMT
I can't quite understand the timing of all this. FS have been fairly consistent with their flow of loans until this deluge of property loans. Why now, and why all at once? My guess is that FS have partnered recently with an established bridging finance intermediary, greatly increasing their new loan origination.
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oldgrumpy
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Post by oldgrumpy on Mar 27, 2016 9:44:20 GMT
After reading through the details of all 9 of the currently available loans (all property), I've come to the conclusion that FS is becoming too heavily biased towards the riskier end of property lending. Eight of the nine are under priced for risk IMO, with just the one at 11% (again IMO) more accurately reflecting the risk.
Interesting you should say that. I've picked out the 11% one for most of this week's investment on FS, with just token punts on a few of the others at higher rates.
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hendragon
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Post by hendragon on Mar 27, 2016 9:48:03 GMT
I can't quite understand the timing of all this. FS have been fairly consistent with their flow of loans until this deluge of property loans. Why now, and why all at once? My guess is that FS have partnered recently with an established bridging finance intermediary, greatly increasing their new loan origination. you may well be right. With the lack of information from FS we will all draw our own conclusions. Personally I have put two and two together and currently have an answer of around 242.7 
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Post by bracknellboy on Mar 28, 2016 14:03:14 GMT
After reading through the details of all 9 of the currently available loans (all property), I've come to the conclusion that FS is becoming too heavily biased towards the riskier end of property lending. Eight of the nine are under priced for risk IMO, with just the one at 11% (again IMO) more accurately reflecting the risk.
So I guess you are referring to the farm.....The property which makes up the bulk of the value of the security is currently occupied by the applicant. Raise any concerns ?
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Post by mrclondon on Mar 28, 2016 14:58:20 GMT
After reading through the details of all 9 of the currently available loans (all property), I've come to the conclusion that FS is becoming too heavily biased towards the riskier end of property lending. Eight of the nine are under priced for risk IMO, with just the one at 11% (again IMO) more accurately reflecting the risk.
So I guess you are referring to the farm.....The property which makes up the bulk of the value of the security is currently occupied by the applicant. Raise any concerns ? Umm, an interesting point. I had sub-consciously equated it to a commercial mortgage without really giving the residential aspect much thought. The residential mortgage regulations provide for an exception if "less than 40% of the land secured by the mortgage is used, or intended to be used, as or in connection with a dwelling by the borrower" I'm fairly sure that the 40% is by land area (in which case well under) rather than by value.
I'm mainly investing for the long term, so with an acceptable LTV 1st charge I'm less concerned about how long a recovery on default could take.
bracknellboy - I've made a late edit after a bit more research, as I'm now fairly sure the 40% relates to land area not value, although the area of each additional floor of a multi-storey building has to be added onto the land area.
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Post by bracknellboy on Mar 28, 2016 19:14:34 GMT
is the property The Shard in disguise ?  |
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Post by bracknellboy on Mar 28, 2016 19:51:16 GMT
Not gone back to FS to check, but I recall that there were 3 separate charges involved. Is the land element attached to the charge on the residential property I wonder ?
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mikes1531
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Post by mikes1531 on Apr 4, 2016 2:54:49 GMT
Most lenders still keep high hopes of selling through the SM later on but that will be more and more difficult. Big lenders that enjoyed a few % of bonus will rig the SM by offering such discounts that the small lenders would not be willing to challenge. High tax payers will offer better discounts as well. 0.75% discount after only 20 days into the loan may suit only the two above mentioned categories. It will be interesting to see what discounts will be on offer after a few months on loans with less than 40 days left. Imo we could see 3% discounts after the loan has only 31 days left. That could equate to no-risk 6.5% annual interest with no tax for 40% tax payers for 15% loan (12%+3% bonus). The very same discounted parts might be of great interest to non-tax payers who are willing to take the risk of holding the loans through difficulties. : I don't think you've considered the fact that bonus interest rates are payable only on parts that are held to maturity, and only to the original purchaser. (See the section on Incentive Bonuses' in FS's detailed explanation of the SM.) So if someone sells a part of a '15%' loan (12%+3% bonus), the amount they receive from the purchaser will reflect only the 12% base interest, and the 3% bonus interest would be lost. And similarly, there's no advantage in buying such '15%' loans on the SM because the purchaser will receive only the 12% base interest at maturity.
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spyrogyra
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Post by spyrogyra on Apr 4, 2016 9:41:22 GMT
Honestly I didn't know the extra restriction on receiving the 3%bonus. Still, if big hitters are factoring the risk, it might become the norm to see -2% for loans close to maturity.
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merlin
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Post by merlin on Apr 4, 2016 12:03:41 GMT
Returning to the title of this thread. I personally don't have a problem with increased activity with property. However I can't help wondering if FS and a few other P2P's have the resources to deal with defaults in this market. Chasing down defaulters in the mortgage market can be expensive in time and cost. It also requires expert knowledge of this type of business.
AC who entered the P2P market specialising in property did so backed by people who have had years of experience in dealing with problems specific to property. However even they having problems with some of their difficult loans and Eppy in particular. I wonder how FS, SS, etc would have dealt with Eppy? I guess only time will tell!
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