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 May 2, 2016 22:56:34 GMT
Yes. Be assured that mikes1531 knows what he's talking about, as do ilmoro , samford71 and anyone else who's been investing in bridging loans for some time. Incidentally, it won't be too long before I'll have been in FS's boatyard loan for a full year, and we haven't even got to the stage of an LPA Receiver being discussed! Thanks steve, me too to the tune of +5k, but its not a default, so not relevant (tho it should be by now) I am fully assured of the experiences of the above named, personally i have recently retired from 35yrs of property development, with many years experience of bridging loans, and not once come across the what seems now to be regularly quoted AC scenario, some of the negative rhetoric on this forum is nigh on laughable, (sorry to be so blunt) I have been investing with SS, FS and MT for some years now, and not once come across the AC scenario shovelled at me in the last 30 mins, why is the rhetoric so negative, please see ratesetter thread at the moment, its barmy, i am some times puzzled as to what the regular posters are trying to achieve, are we trying to encourage or discourage? SS have had loans that have gone on just as long as AC but as the lender/borrower has possibly more leeway to allow extensions, no default interest. FS dont have a mature property loan book so too early to say if that scenario will arise, MT also has a lack of mature property loans, only been going for 14 months so again too early to say.
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Post by earthbound on May 2, 2016 23:00:25 GMT
Thanks steve, me too to the tune of +5k, but its not a default, so not relevant (tho it should be by now) I am fully assured of the experiences of the above named, personally i have recently retired from 35yrs of property development, with many years experience of bridging loans, and not once come across the what seems now to be regularly quoted AC scenario, some of the negative rhetoric on this forum is nigh on laughable, (sorry to be so blunt) I have been investing with SS, FS and MT for some years now, and not once come across the AC scenario shovelled at me in the last 30 mins, why is the rhetoric so negative, please see ratesetter thread at the moment, its barmy, i am some times puzzled as to what the regular posters are trying to achieve, are we trying to encourage or discourage? SS have had loans that have gone on just as long as AC but as the lender/borrower has possibly more leeway to allow extensions, no default interest. Hi ilmorro, Loans or defaults?, a loan extension does equate to a default, indeed a loan extension is used to avoid a default.
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Post by earthbound on May 2, 2016 23:07:36 GMT
Thanks samford71 can you point me in right direction to read the details of what went wrong, it will help with future DD. If you're not on the AC platform, it's difficult to point you to the details. I exited all three prior to their default (via the secondary market) so I am not privy to all their gory details. You should sign up and you can read through these at your leisure. On Loan 132, though, it was clear to me that the original valuation always seemed rather aggressive and subject to certain assumptions that seemed vulnerable to change over time. Essentially it was assumed there was demand for high end flats in that area but in fact rental demand was for HMO / student lets. Given the demographics of the area (low population density, low affluence), such a high value / specialized residential property was always going to prove a challenge to sell quickly. The end result was an auction which realized a much lower price.
It's worth also noting that on AC is a good example of how much commercial property can fall (loan 45). A major bank advanced a £5mm loan on a £6.6m property pre 2008. Post 2008, the bank offered £3.6mm in debt forgiveness to get the loan off the books. AC refinanced the loan in late 13 but this time the property valuation was just £2.2mm, just 33% of the original valuation (i.e it didn't bounce back).
Hi samford71 thanks for the info, loan 132, sold at auction, was it an extended period, ie+2years, i cannot comment on your last paragraph with regards to commercial property as i have never dealt with commercial, indeed my original post, with regards now to this extended discussion, is based purely on residential properties, as stated in my original post.
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Post by earthbound on May 2, 2016 23:17:13 GMT
Thanks samford71 can you point me in right direction to read the details of what went wrong, it will help with future DD. Point is, there is lots that can and do go wrong. Give the property a value yourself and a likelihood of achieving that value in a stressed sale, then throw in a recession for good measure and chuck a few quid on it if you trust the platform! pepperpot, i fully agree, if you trust the platform, and the DD that the platform performs, then chuck in your money, that's what i do, ... what i would add to that is, do not be swayed by some of the negative nonsense posted on this forum.
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
Posts: 11,329
Likes: 11,549
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Post by ilmoro on May 2, 2016 23:22:10 GMT
If you're not on the AC platform, it's difficult to point you to the details. I exited all three prior to their default (via the secondary market) so I am not privy to all their gory details. You should sign up and you can read through these at your leisure. On Loan 132, though, it was clear to me that the original valuation always seemed rather aggressive and subject to certain assumptions that seemed vulnerable to change over time. Essentially it was assumed there was demand for high end flats in that area but in fact rental demand was for HMO / student lets. Given the demographics of the area (low population density, low affluence), such a high value / specialized residential property was always going to prove a challenge to sell quickly. The end result was an auction which realized a much lower price.
It's worth also noting that on AC is a good example of how much commercial property can fall (loan 45). A major bank advanced a £5mm loan on a £6.6m property pre 2008. Post 2008, the bank offered £3.6mm in debt forgiveness to get the loan off the books. AC refinanced the loan in late 13 but this time the property valuation was just £2.2mm, just 33% of the original valuation (i.e it didn't bounce back).
Hi samford71 thanks for the info, loan 132, sold at auction, was it an extended period, ie+2years, i cannot comment on your last paragraph with regards to commercial property as i have never dealt with commercial, indeed my original post, with regards now to this extended discussion, is based purely on residential properties, as stated in my original post. Actually didnt sell at auction, though auction may have generated the interest, private buyer & sale not complete as bid just accepted. Had been on market for c13 months and seen asking price decrease 50% in that time There is negativity (I share that view on RS posts) & being realistic, there a number of people on this forum who have posited strong arguments that returns on property P2P shouldnt be expected to be more than 6-7% over the cycle as a counter to the optimistic view of returns that is the general norm on the forums.
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Post by earthbound on May 2, 2016 23:24:52 GMT
Hi samford71 thanks for the info, loan 132, sold at auction, was it an extended period, ie+2years, i cannot comment on your last paragraph with regards to commercial property as i have never dealt with commercial, indeed my original post, with regards now to this extended discussion, is based purely on residential properties, as stated in my original post. Actually didnt sell at auction, though auction may have generated the interest, private buyer & sale not complete as bid just accepted. Had been on market for c13 months and seen asking price decrease 50% in that time Thanks for info ilmorro... c13 months, well short of "over 2 years" was this resi or commercial?
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
Posts: 11,329
Likes: 11,549
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Post by ilmoro on May 2, 2016 23:34:50 GMT
Actually didnt sell at auction, though auction may have generated the interest, private buyer & sale not complete as bid just accepted. Had been on market for c13 months and seen asking price decrease 50% in that time Thanks for info ilmorro... c13 months, well short of "over 2 years" was this resi or commercial? Property refurbished into flats. It will be 15 months before sale complete (assuming no hiccups) (not far off 2 years after default) and then there will be further time beyond that to effect any further recovery, so in all liklihood in line with mikes1531 prediction The other two are one resi (issues) and one commercial residential (still on market after 14 months - 1 failed sale)
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Post by earthbound on May 2, 2016 23:38:49 GMT
Thanks for info ilmorro... c13 months, well short of "over 2 years" was this resi or commercial? Property refurbished into flats. It will be 15 months before sale complete (assuming no hiccups) (not far off 2 years after default) and then there will be further time beyond that to effect any further recovery, so in all liklihood in line with mikes1531 prediction hi ilmoro, thanks again, is the scenario above resi or commercial, please be assured i am more than happy to concede and indeed admit i was mistaken.
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ilmoro
Member of DD Central
'Wondering which of the bu***rs to blame, and watching for pigs on the wing.' - Pink Floyd
Posts: 11,329
Likes: 11,549
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Post by ilmoro on May 2, 2016 23:47:18 GMT
Property refurbished into flats. It will be 15 months before sale complete (assuming no hiccups) (not far off 2 years after default) and then there will be further time beyond that to effect any further recovery, so in all liklihood in line with mikes1531 prediction hi ilmoro, thanks again, is the scenario above resi or commercial, please be assured i am more than happy to concede and indeed admit i was mistaken. Residential
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Post by earthbound on May 2, 2016 23:54:03 GMT
hi ilmoro, thanks again, is the scenario above resi or commercial, please be assured i am more than happy to concede and indeed admit i was mistaken. Residential Thanks ilmorro, it took some time to get here, but here we now are. my apologies to mike1531 (i think its 1531, but we know where we are) , indeed it can take a residential default over 2 years to sell, it's certainly is new to me, personally after all my years in property messin about, it didnt happen. But nevertheless i will concede that it does happen.
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mikes1531
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Post by mikes1531 on May 3, 2016 15:06:42 GMT
... it took some time to get here, but here we now are. my apologies to mike1531 (i think its 1531, but we know where we are) , indeed it can take a residential default over 2 years to sell, it's certainly is new to me, personally after all my years in property messin about, it didnt happen. But nevertheless i will concede that it does happen. earthbound : Sorry for the long silence from me -- I was away for the weekend. No apologies are necessary -- you write based on your experience, and I write based on mine, and they're not necessarily the same. (And yes, it's 1531.) Others have given more details on some of the AC defaults, so I won't repeat that, but I do want to thank those who contributed. As for how easily matters can drag on until two years have elapsed, a lot depends on when you start counting. My comment was in response to yours... ... bear in mind most loans are for 6 or 12 months. PBLs may be for 6-12 months when they are made, but my experiences on another platform are that if a borrower fails to repay and it becomes necessary to call in the receivers, investors will have their money tied up for considerably more than 6-12 months. ISTM that getting out in less than two years is likely to be difficult. ...and what I was trying to say was that 6-12 months easily could grow to 24+ months if there was a default. In some of the examples mentioned by others, we're approaching two years after default, so investors in from the beginning will be in for 3+years before all is wrapped up. Furthermore, when a PBL drags on that long, the accrued interest and fees make it difficult, if not impossible, to recover all that is owed from the sale of the primary security. If there is additional security, such as a PG, attempts to recovery anything from that can't even be started until it's known how big the shortfall is, so that recovery process extends the timescale even further. There's also a issue of when a default actually occurs. There's a legal/technical definition, and in many cases that doesn't happen until well after the loan matures, mainly because the platform wants to avoid having defaults on their track record, and they need to bend over backwards to be seen to be treating their borrowers fairly. (If they don't, it could prejudice their position in any recovery proceedings.) So they offer 'extensions'. Such unilateral extensions may avoid an official default, but that's just a technicality because of the way the law works. When a borrower fails to keep to their contract to repay, and particularly when they make no effort to pay any of what is owed and offer no concessions/compensation to lenders for that failure, as far as I'm concerned, they have defaulted. But then, I'm not a lawyer or an accountant -- my background is in engineering.
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Post by earthbound on May 3, 2016 15:25:57 GMT
... it took some time to get here, but here we now are. my apologies to mike1531 (i think its 1531, but we know where we are) , indeed it can take a residential default over 2 years to sell, it's certainly is new to me, personally after all my years in property messin about, it didnt happen. But nevertheless i will concede that it does happen. earthbound : Sorry for the long silence from me -- I was away for the weekend. No apologies are necessary -- you write based on your experience, and I write based on mine, and they're not necessarily the same. (And yes, it's 1531.) Others have given more details on some of the AC defaults, so I won't repeat that, but I do want to thank those who contributed. As for how easily matters can drag on until two years have elapsed, a lot depends on when you start counting. My comment was in response to yours... PBLs may be for 6-12 months when they are made, but my experiences on another platform are that if a borrower fails to repay and it becomes necessary to call in the receivers, investors will have their money tied up for considerably more than 6-12 months. ISTM that getting out in less than two years is likely to be difficult. ...and what I was trying to say was that 6-12 months easily could grow to 24+ months if there was a default. In some of the examples mentioned by others, we're approaching two years after default, so investors in from the beginning will be in for 3+years before all is wrapped up. Furthermore, when a PBL drags on that long, the accrued interest and fees make it difficult, if not impossible, to recover all that is owed from the sale of the primary security. If there is additional security, such as a PG, attempts to recovery anything from that can't even be started until it's known how big the shortfall is, so that recovery process extends the timescale even further. There's also a issue of when a default actually occurs. There's a legal/technical definition, and in many cases that doesn't happen until well after the loan matures, mainly because the platform wants to avoid having defaults on their track record, and they need to bend over backwards to be seen to be treating their borrowers fairly. (If they don't, it could prejudice their position in any recovery proceedings.) So they offer 'extensions'. Such unilateral extensions may avoid an official default, but that's just a technicality because of the way the law works. When a borrower fails to keep to their contract to repay, and particularly when they make no effort to pay any of what is owed and offer no concessions/compensation to lenders for that failure, as far as I'm concerned, they have defaulted. But then, I'm not a lawyer or an accountant -- my background is in engineering. mikes1531 reply appreciated, thanks, always a learning curve, i learned some new info last night, worked in property for many years, but always done things the correct way, so never had to go down the repossession/default road, i must admit i was under the impression that the receiver was for the bankrupts, again never been there so obviously i had the wrong impression. Thanks again for the reply.
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mikes1531
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Post by mikes1531 on May 3, 2016 16:07:12 GMT
I can think of a three more AC examples...
Furniture Retailer (AC Loan #70): Drew down Apr.'14, made one payment, and then the business failed. About half of the principal was repaid in Aug.'14. The remaining principal and some accrued interest was repaid in Feb.'15. The remaining accrued interest was repaid in Apr.'16. The result was this good only because of AC's generosity -- they were entitled to recover their costs before lenders' interest but allowed their investors to recover earlier. AFAIK AC still are waiting to recovery their costs. (This recovery was from the PG rather than the sale of property, so perhaps it isn't a good example.)
Hackney Commercial/Residential (AC Loans #67 and #130) (Flats above shops): This started as a 6-month PBL that wasn't paid off when due. It was rolled forward into an 'extension' PBL in Aug.'14, so the first loan probably was made in late-2013. (First loan pre-dates current AC website, so very little info online.) The latter loan was repaid at the end of Jul.'15 after the property was sold. So it didn't quite take two years from start to finish. IIRC, lenders in the first loan weren't given a choice whether or not to roll their investment forward into the second loan.
Kent (AC Loan #84): Drew down May '14. I don't know what the term was originally, but six monthly payments were made -- possibly out of retained loan proceeds -- then nothing until property sold in Mar'16. Again, just under two years from start to finish.
As for whether to call in a receiver, if the borrower can't repay the loan after a bit of forbearance from the platform, I get the feeling that it's in the best interests of the investors to engage a LPA receiver, who is a specialist professional who should know the Law of Property Act inside out. It would appear that it's all too easy to do things in trying to recover from a defaulting borrower that aren't quite in keeping with the LPA and which could provide the borrower a loophole which could allow them to escape their loan obligations. ISTM that any P2P platform that didn't engage all the appropriate 'experts' in the recovery process, and recovered less than 100% of their investors' outstanding capital and accrued interest, would lay themselves open to claims of mishandling the process -- and that could be extremely damaging to the platform's future.
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mikes1531
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Post by mikes1531 on May 3, 2016 16:21:47 GMT
... i am some times puzzled as to what the regular posters are trying to achieve, are we trying to encourage or discourage? I can only speak for myself, but my goal is to learn and to help others do the same. ISTM that there are a lot of inexperienced investors coming into P2P who are blinded by the double-digit interest rates and do not appreciate the risks they are taking with their money. They may be in a position where they can afford to take the risks in pursuit of the high returns, and P2P lending is an appropriate investment for them. I'm just trying to ensure they fully understand and consider what they are getting into.
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ilmoro
Member of DD Central
'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 May 3, 2016 16:35:36 GMT
I can think of a three more AC examples... Furniture Retailer (AC Loan #70): Drew down Apr.'14, made one payment, and then the business failed. About half of the principal was repaid in Aug.'14. The remaining principal and some accrued interest was repaid in Feb.'15. The remaining accrued interest was repaid in Apr.'16. The result was this good only because of AC's generosity -- they were entitled to recover their costs before lenders' interest but allowed their investors to recover earlier. AFAIK AC still are waiting to recovery their costs. (This recovery was from the PG rather than the sale of property, so perhaps it isn't a good example.) Hackney Commercial/Residential (AC Loans #67 and #130) (Flats above shops): This started as a 6-month PBL that wasn't paid off when due. It was rolled forward into an 'extension' PBL in Aug.'14, so the first loan probably was made in late-2013. (First loan pre-dates current AC website, so very little info online.) The latter loan was repaid at the end of Jul.'15 after the property was sold. So it didn't quite take two years from start to finish. IIRC, lenders in the first loan weren't given a choice whether or not to roll their investment forward into the second loan. Kent (AC Loan #84): Drew down May '14. I don't know what the term was originally, but six monthly payments were made -- possibly out of retained loan proceeds -- then nothing until property sold in Mar'16. Again, just under two years from start to finish. As for whether to call in a receiver, if the borrower can't repay the loan after a bit of forbearance from the platform, I get the feeling that it's in the best interests of the investors to engage a LPA receiver, who is a specialist professional who should know the Law of Property Act inside out. It would appear that it's all too easy to do things in trying to recover from a defaulting borrower that aren't quite in keeping with the LPA and which could provide the borrower a loophole which could allow them to escape their loan obligations. ISTM that any P2P platform that didn't engage all the appropriate 'experts' in the recovery process, and recovered less than 100% of their investors' outstanding capital and accrued interest, would lay themselves open to claims of mishandling the process -- and that could be extremely damaging to the platform's future. Not forgetting the holiday park, Essex commercial (the last of the dodgy ones i believe), and the Green energy company stiffed by HMG, then there's the gift that keeps on giving #74 but that ones tradeable so probably doesnt count. Phones, plumbers & glasses are probably disqualified.
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