registerme
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Post by registerme on Apr 1, 2016 12:38:42 GMT
.....the higher risk stuff that knocked the stuffing out of the banks in the past crisis.... Is that correct? Most losses incurred by US banks, and the investment banking arms of banks from other countries, were related to sub-prime, and the way those mortgages were sold, packaged and dumped. With woefully inaccurate risk and value modelling from the credit rating agencies adding significantly to the problem, complicated by securitisation and lack of skin in the game. The more vanilla type losses incurred by UK lenders (Northern Rock etc) were related to crappy mortgage books (as with US sub-prime, NINJA loans etc) and reliance on the wholesale funding markets (rather than stickier retail deposits). You can chuck in a bit of egregiously stupid lending by the likes of RBS on vanity projects for good measure as well (though most of RBS' losses related to their US sub-prime exposure). I don't think much of the above can be directly related to the bridging / property development lending we do on the likes of SS / AC / MT. Having said that I'd love to hear a counter-argument  .
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nick
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Post by nick on Apr 1, 2016 13:30:30 GMT
.....the higher risk stuff that knocked the stuffing out of the banks in the past crisis.... Is that correct? Most losses incurred by US banks, and the investment banking arms of banks from other countries, were related to sub-prime, and the way those mortgages were sold, packaged and dumped. With woefully inaccurate risk and value modelling from the credit rating agencies adding significantly to the problem, complicated by securitisation and lack of skin in the game. The more vanilla type losses incurred by UK lenders (Northern Rock etc) were related to crappy mortgage books (as with US sub-prime, NINJA loans etc) and reliance on the wholesale funding markets (rather than stickier retail deposits). You can chuck in a bit of egregiously stupid lending by the likes of RBS on vanity projects for good measure as well (though most of RBS' losses related to their US sub-prime exposure). I don't think much of the above can be directly related to the bridging / property development lending we do on the likes of SS / AC / MT. Having said that I'd love to hear a counter-argument . True, but the types of loans being invested in on SS / AC / MT are towards the crappy end of the spectrum and are likely to by the most immediately exposed in a stall of the housing market. I think there is quite a lot of refinancing risk in much of the P2P loan books where repayment is dependent on being refinanced at a reasonable rate by a mainstream lender or provision property development loans. If liquidity in these markets dry up (and when/if they do, it will likely be a very sudden change) it could have a disproportionate affect on this end of the market versus the mainstream mortgage market. I still believe that property loans on SS / AC / MT provide a better risk/return than most SME loans, however, I'm weary of being overly concentrated in this asset class and being over exposed to a potential plateauing/fall in property prices and the knock effect on credit markets which are likely to turn quickly on any material change in sentiment.
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registerme
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Post by registerme on Apr 1, 2016 14:50:43 GMT
nick, interesting commentary, thanks.
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Post by Financial Thing on Apr 7, 2016 22:29:18 GMT
Is that correct? Most losses incurred by US banks, and the investment banking arms of banks from other countries, were related to sub-prime, and the way those mortgages were sold, packaged and dumped. With woefully inaccurate risk and value modelling from the credit rating agencies adding significantly to the problem, complicated by securitisation and lack of skin in the game. The more vanilla type losses incurred by UK lenders (Northern Rock etc) were related to crappy mortgage books (as with US sub-prime, NINJA loans etc) and reliance on the wholesale funding markets (rather than stickier retail deposits). You can chuck in a bit of egregiously stupid lending by the likes of RBS on vanity projects for good measure as well (though most of RBS' losses related to their US sub-prime exposure). I don't think much of the above can be directly related to the bridging / property development lending we do on the likes of SS / AC / MT. Having said that I'd love to hear a counter-argument . True, but the types of loans being invested in on SS / AC / MT are towards the crappy end of the spectrum.... Really? So long as the valuations are accurate, I think some of the loans on these platforms are quite good. Loans secured by property in Sandbanks, center of Manchester with decent LTV's are valuable. The property crash we saw in 2008 was an anomaly. Won't say a "crash" won't happen again, but here in Poole, the crash meant a temporary 10-15% drop in prices.
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Post by mrclondon on Apr 8, 2016 0:02:21 GMT
So long as the valuations are accurate, I think some of the loans on these platforms are quite good. And therein lies the problem. Only some of the valuations retain their accuracy for long.
I've just started a new thread on the FS board of a Bristol mixed use property which was valued in December. The valuation report has been "re-addressed" to use the legal jargon last Month, and I'm far from certain it represents the current situation. It might be fine, but there again it might not.
What worries me is people using such valuations for making investment decisions.
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Post by jackpease on Apr 8, 2016 6:14:33 GMT
Won't say a "crash" won't happen again, but here in Poole, the crash meant a temporary 10-15% drop in prices. I think what is happening with the Assetz Anglesey loan is a good of example of how SS loans could fail. All the paperwork looks good and when the first default happens everything unravels. Assetz seems pretty forensic with its paperwork and its monitoring so I dont' believe we can blame the platform there. It may very well be the case that the Anglesey property has only dropped 10-15% - but the property itself appears unsellable and any loan parts with Assetz pretty toxic despite Assetz best efforts. And this is happening in good times - in bad times - I think most SS loans will freeze up as investors run scared. So for me I invest in SS as part of my portfolio but many appear to consider SS is safe because it is "secured" on property and that worries me. Jack P
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Post by meledor on Apr 8, 2016 7:42:51 GMT
Won't say a "crash" won't happen again, but here in Poole, the crash meant a temporary 10-15% drop in prices. I think what is happening with the Assetz Anglesey loan is a good of example of how SS loans could fail. All the paperwork looks good and when the first default happens everything unravels. Assetz seems pretty forensic with its paperwork and its monitoring so I dont' believe we can blame the platform there. It may very well be the case that the Anglesey property has only dropped 10-15% - but the property itself appears unsellable and any loan parts with Assetz pretty toxic despite Assetz best efforts. And this is happening in good times - in bad times - I think most SS loans will freeze up as investors run scared. So for me I invest in SS as part of my portfolio but many appear to consider SS is safe because it is "secured" on property and that worries me. Jack P
Is the Anglesey valuation on the website? I couldn't see it in the Documents tab. This loan appears to have defaulted in June 2014 and still hasn't been sold?
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Post by jackpease on Apr 8, 2016 8:08:28 GMT
Is the Anglesey valuation on the website? I couldn't see it in the Documents tab. This loan appears to have defaulted in June 2014 and still hasn't been sold?
Err dunno about the valuation - i read it before i invested when it launched and was reassured. Much discussion of this loan in Pink Pages where it shows how hard it is to realise property assets in distress. IMHO it shows how a property valuation and LTV don't count for much when you have an unfortunate cocktail of problems with the property itself and the borrower. Jack P
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Post by Financial Thing on Apr 8, 2016 8:16:00 GMT
So long as the valuations are accurate, I think some of the loans on these platforms are quite good. And therein lies the problem. Only some of the valuations retain their accuracy for long.
I've just started a new thread on the FS board of a Bristol mixed use property which was valued in December. The valuation report has been "re-addressed" to use the legal jargon last Month, and I'm far from certain it represents the current situation. It might be fine, but there again it might not.
What worries me is people using such valuations for making investment decisions.
Agreed. To be fair, I'd say the average investor doesn't comb through all the documents when loan picking. Once more defaults happen, people who blanket invest might have to become more diligent when loan selecting. jackpease These situations are bound to occur sometimes. That's why diversification is so important.
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ilmoro
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'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
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Post by ilmoro on Apr 8, 2016 8:35:21 GMT
Is the Anglesey valuation on the website? I couldn't see it in the Documents tab. This loan appears to have defaulted in June 2014 and still hasn't been sold?
Err dunno about the valuation - i read it before i invested when it launched and was reassured. Much discussion of this loan in Pink Pages where it shows how hard it is to realise property assets in distress. IMHO it shows how a property valuation and LTV don't count for much when you have an unfortunate cocktail of problems with the property itself and the borrower. Jack P Didnt think valuation has ever been provided to protect borrowers anonymity. Or am I getting confused with one of the other BL sagas
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Post by brettb on Apr 8, 2016 9:47:05 GMT
I've got a % of my assets in P2P that would cause a lot of people sleepless nights... however I have a good career, I'm many years from retirement and can earn back anything I lose. Also my last day job was in risk management. Up to now I've been doing OK except for Rebs (a topic for another thread  ). As I work in IT (which is hugely cyclical) I've been through a lot of downturns. From current IT salaries I'd say the economy is peaking, but away from banking and commodities and IT unicorns there are a lot of businesses making some very good money in the "real" economy. I'm currently favouring asset backed loans. Property should be good for years to come as so much commercial property has been turned into resi that there will be dire shortages soon. My last two companies both relocated and finding new offices was a really hassle for them. I heard warehouses are also in short supply these days. |
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Post by mrclondon on Apr 8, 2016 11:14:03 GMT
jackpease ilmoro
The Anglesey valuation was never made available to us by AC. Indeed (unusually for the time) the loan was funded by a handful of underwriters who were claimed by AC to have done their own due diligence on the loan (because as I recall a quick drawdown was needed to buy the security back from LPA). Details have been available via the selling agents website(s) over the course of the last year. The problem with this project is simple - at the time the borrower originally conceived the project (i.e. long before AC's involvement) there would have been strong demand for rental flats of this nature by interim managers, new senior management and consultants working at the vast Anglesey Aluminium complex. But that factory closed when it was announced that the nuclear power station next door was to close due to reaching the end of its life (Aluminium processing is hugely energy intensive). The AC credit report (and presumably the valuation report we never saw) sold us the concept the flats would be attractive to young professionals working in Bangor, but in reality these flats are just too remote to be of interest to that demographic.
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