mikes1531
Member of DD Central
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Post by mikes1531 on May 3, 2016 17:23:13 GMT
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. How could I have forgotten about those -- I'm in most of them! Essex (AC #136): Drew down Oct.'14, payments made through Jul.'15, then nothing. Lenders voted to call in receivers Jan'16, but it hasn't happened yet because borrower seems close to selling property -- though has been for months. If it doesn't happen by next month, I'll guess that the next vote won't go in favour of a further extension for the borrower. Holiday Park (AC #39): Drew down Oct.'13, payments made through Sep.'14, then nothing. Receivers called, seem close to a sale. That, however, won't clear all that's owed, so once the sale is complete (~30 months after drawdown) AC can start recovery process on secondary security. Additional security is borrower's house, so recovery will be a long process unless amount claimed is small enough that borrower is willing to pay up so as to avoid losing their home. (AC #74): Accurately described by ilmoro above, lenders are happy but borrower can't be. Drew down Mar.'14, payments made through maturity in Mar.'15. Borrower has been working on re-finance ever since, meanwhile paying 18% 'default' interest monthly. (Including today!)
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Post by earthbound on May 3, 2016 19:08:45 GMT
Thanks for the additional info fellas, i think i might avoid AC in the future,  are they just unlucky or are they taking on risky loans or is that how the market pans out over a longer period? |
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Post by mrclondon on May 3, 2016 19:53:24 GMT
Thanks for the additional info fellas, i think i might avoid AC in the future, are they just unlucky or are they taking on risky loans or is that how the market pans out over a longer period? The only difference is AC have been writing property bridging loans for longer than SS / FS / MT and as explained earlier sorting out defaulted loans will typically take a couple of years. AC's loan book is roughly inline with what should be expected for any platform offering property backed loans.
FS will reach an equivalent stage in probably 12-18 months time as the quality of the property loans written in the last few months has been fairly poor. SS has a much smaller loan book in terms of number of loans (but they are of course much higher value) but some of them are also very poor quality.
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Post by earthbound on May 3, 2016 20:20:03 GMT
Thanks for the additional info fellas, i think i might avoid AC in the future, are they just unlucky or are they taking on risky loans or is that how the market pans out over a longer period? The only difference is AC have been writing property bridging loans for longer than SS / FS / MT and as explained earlier sorting out defaulted loans will typically take a couple of years. AC's loan book is roughly inline with what should be expected for any platform offering property backed loans.
FS will reach an equivalent stage in probably 12-18 months time as the quality of the property loans written in the last few months has been fairly poor. SS has a much smaller loan book in terms of number of loans (but they are of course much higher value) but some of them are also very poor quality.
Thanks for that, this is probably a good time to pose a question i have been wanting to ask for some time, with both SS and MT , my investment strategy is, invest in almost everything, (not the very poor, if i can avoid) i always hold to 30 days remaining, then sell and diversify to longer dated loans via the SM, at times like now its not easy, but on bank holiday Monday over a 3 hour period i managed to invest my interest ok, (£800+) and when a new loan is released, diversify again to get to where i want to be. But here is my theory, (and here is where i need to find out if my theory holds up) i will never get caught out in a default, SS issue the loan and take the interest up front, so if its a six month loan, i am guaranteed my interest for 5 months, at which point i get out and diversify, again into a longer dated loan. (not always easy, but do-able) But here is my main worry, can a loan default mid term, and how likely is it, even tho SS already have the interest fully paid, in advance for 6 months? edit.. apologies, just realised we are on FS thread.
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Post by mrclondon on May 3, 2016 20:56:14 GMT
Thanks for that, this is probably a good time to pose a question i have been wanting to ask for some time, with both SS and MT , my investment strategy is, invest in almost everything, (not the very poor, if i can avoid) i always hold to 30 days remaining, then sell and diversify to longer dated loans via the SM, at times like now its not easy, but on bank holiday Monday over a 3 hour period i managed to invest my interest ok, (£800+) and when a new loan is released, diversify again to get to where i want to be. But here is my theory, (and here is where i need to find out if my theory holds up) i will never get caught out in a default, SS issue the loan and take the interest up front, so if its a six month loan, i am guaranteed my interest for 5 months, at which point i get out and diversify, again into a longer dated loan. (not always easy, but do-able) But here is my main worry, can a loan default mid term, and how likely is it, even tho SS already have the interest fully paid, in advance for 6 months? edit.. apologies, just realised we are on FS thread. I'm afraid your theory falls flat ... a loan can default at any time. The most obvious example is if there is another charge holder on the security and they decide to call in the security (by appointing, or forcing the appointment of an LPA receiver). The other probable cause is if the borrower ceases to exist in same the legal form as when the loan was drawn (e.g. bankruptcy, death, insolvency, administration ?, striking off). In this case a platform with retained interest may delay declaring the default for a short time until legal necessity forces it.
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Post by earthbound on May 3, 2016 21:09:03 GMT
Thanks for that, this is probably a good time to pose a question i have been wanting to ask for some time, with both SS and MT , my investment strategy is, invest in almost everything, (not the very poor, if i can avoid) i always hold to 30 days remaining, then sell and diversify to longer dated loans via the SM, at times like now its not easy, but on bank holiday Monday over a 3 hour period i managed to invest my interest ok, (£800+) and when a new loan is released, diversify again to get to where i want to be. But here is my theory, (and here is where i need to find out if my theory holds up) i will never get caught out in a default, SS issue the loan and take the interest up front, so if its a six month loan, i am guaranteed my interest for 5 months, at which point i get out and diversify, again into a longer dated loan. (not always easy, but do-able) But here is my main worry, can a loan default mid term, and how likely is it, even tho SS already have the interest fully paid, in advance for 6 months? edit.. apologies, just realised we are on FS thread. I'm afraid your theory falls flat ... a loan can default at any time. The most obvious example is if there is another charge holder on the security and they decide to call in the security (by appointing, or forcing the appointment of an LPA receiver). The other probable cause is if the borrower ceases to exist in same the legal form as when the loan was drawn (bankruptcy, death, insolvency, administration ?, striking off). In this case a platform with retained interest may delay declaring the default for a short time until legal necessity forces it. thanks for your insight, actually i feel a lot better after your response, i was expecting worse. The point about another charge holder does not apply as i only invest where SS have a 1st charge, (it was a position that i personally included in the ('not the very poor if i can avoid bit') your second point (if the borrower ceases to exist in same the legal form as when the loan was drawn (bankruptcy, death, insolvency, administration ?, striking off). is a worrying area, but not one that i have any control over, and their, for me, lies the main risk. But i assume, like everyone else who invests, Is it a risk worth taking? I personally am well diversified, so i suppose, yes.
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ben
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Post by ben on May 3, 2016 21:19:43 GMT
aslo just because people are willing to buy loans now on the secondary market they might not in the future, by your post it sounds like with your theory you would expect to sell everything and never be left with any defaults.
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Post by mrclondon on May 3, 2016 21:23:36 GMT
The point about another charge holder does not apply as i only invest where SS have a 1st charge,
Hmm ... you've missed the obvious ... a second charge could be registered after the loan has drawn down. In some cases SS might refuse permission for the 2nd charge, in others they might agree, and in the obvious case (County Court charging notice following a CCJ ) they wouldn't be consulted. The 2nd charge holder can still force the 1st charge loan into default by appointing a LPA receiver. The charging order example is a live example on a current SS loan see this thread with the court able to order the sale of the security (and hence force the default of the SS loan) if the CCJ isn't settled in the next few months...
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Post by earthbound on May 3, 2016 21:25:12 GMT
your post it sounds like with your theory you would expect to sell everything and never be left with any defaults. That's exactly right, that's why i posted my theory, so far it has worked perfect, the reason its posted is "where can it go wrong"? i am actively looking for anyone to put me straight, so i can * improve my theory further. edit*.. not "improve my theory further".. but.. *reduce my statistical chances of a loss/default.
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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 23:43:36 GMT
Also accuracy of term displayed is questionable in several cases so you might find a surprise default when retained interest runs out earlier than expected as 12m turns out to be 6m
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Post by dualinvestor on May 4, 2016 15:28:59 GMT
I have not followed this thread too closely but my responses have been on the basis that the platform (FS or whoever) hold the first charge on the security. Recent posts seem to indicate this might not always be the case, and even if they do there might be subsequent charges. This raises two major caveats, firstly the LTV, it is presumably on the nett value after prior charges but what value has been attributed to those prior charges e.g. face value, face value plus interest, plus costs of realisation etc etc. Secondly just how leveraged is the project as a whole? We alraedy know the borrower is prepared to pay an APR of at least 33% and doesn't have a proposition that would be looked at by a conventional lender and therefore likely to be in some way in a distressed situation.
Personal experience gathered over a 30 year professional life is that second and subsequent charge holders rarely get full repayment on "forced sale" situations and often do not get anything at all. So it would be difficult for me to forsee any situation where I would lend anywhere other than a situation that the platform held a first charge.
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mikes1531
Member of DD Central
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Post by mikes1531 on May 4, 2016 17:15:04 GMT
I have not followed this thread too closely but my responses have been on the basis that the platform (FS or whoever) hold the first charge on the security. Recent posts seem to indicate this might not always be the case, and even if they do there might be subsequent charges. This raises two major caveats, firstly the LTV, it is presumably on the nett value after prior charges but what value has been attributed to those prior charges e.g. face value, face value plus interest, plus costs of realisation etc etc. Yes, some platforms do take security that includes second charges, so it's very important to read all of the info provided. AFAIK, the traditional way of calculating LTV is to divide the total of all charges by the value. If a £800k property has a £500k first charge and a £100k second charge, the LTV should be reported as 75% [(500+100)/800=75%]. It is not appropriate to say that, because £300k of equity remains after the first charge, the LTV of the second charge is 33% [100/300=33%], or that the LTV of the second charge is 12.5% [100/800=12.5%]. FS have a tendency to do the latter at times, though they generally show the traditionally calculated LTV as well -- somewhere in the description. Again, it's very important to read all of the info provided. In the case of second charges, I get the feeling that platforms don't get a lot more info about the first charge than the principal outstanding, so they probably couldn't base their LTV on "face value plus interest, plus costs of realisation etc etc." even if they wanted to. One concern I have about second charges is that I get the feeling that the first charge holder is not obligated to tell any lower-ranking charge holder if the borrower isn't making payments on time. So the borrower could be falling behind with their payments, incurring late fees and charges which would be eroding lower-ranking charge holders' positions, and we could be blissfully unaware of that. I tend to avoid loans based on second -- and higher -- charges in general, and particularly if the interest rate doesn't reflect the higher risk involved.
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Post by mrclondon on May 4, 2016 17:37:18 GMT
I have not followed this thread too closely but my responses have been on the basis that the platform (FS or whoever) hold the first charge on the security. Recent posts seem to indicate this might not always be the case, and even if they do there might be subsequent charges.
Probably 1 in 10 p2p loans is reliant on 2nd (or higher) charge security at least in part, although in some cases the 1st charge loan may be with the same p2p platform.
A current example is FS Gleneagles loan 2nd charge loan of £470k behind an external 1st charge of £900k. Very difficult to value the asset in as is condition (shell property with water damage) but other shell properties in that development have been offered at less than the value of those two loans combined so IMO quite a risky loan.
Another slightly different example is on TC where quite a number of loans (particularly via F&P introducers) are split into A and B tranches with the A loan having priority over the B loan, and hence introducing the concept of senior (or senior stretch ) debt as the A loan and mezzanine debt as the B loan. The A loans are generally good value, but the B loans which to all intents and purposes are 2nd charge loans are generally poor value as combined LTV's are often sky high. Current example is the Lo***** Road A & B loans (Not to mention sometimes there are 3 tranches, with the A loan going in its entirety to a single HNWI).
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Post by dualinvestor on May 4, 2016 18:08:08 GMT
One concern I have about second charges is that I get the feeling that the first charge holder is not obligated to tell any lower-ranking charge holder if the borrower isn't making payments on time. The first charge holder owes no duty of care to anyone else, although a Receiver appointed by him does insofar as he is obliged to realise the best possible price in the circumstances, so your feeling is correct the first charge holder does not give anyone else, or at least is not obliged to, information on the loan status.
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Post by earthbound on May 4, 2016 18:22:01 GMT
This turn up may well have thrown my cunning theory of track.  all of my investments are 1st charge only, and i was always under the assumption that it would remain so, to find a second charge is possible , later, after my funds have gone in , is a little unsettling, but was known, but what is more unsettling is to now find that the second charge could in fact instigate a default against the asset without the first charge having a say, that is very worrying. |
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are they just unlucky or are they taking on risky loans or is that how the market pans out over a longer period? 
all of my investments are 1st charge only, and i was always under the assumption that it would remain so, to find a second charge is possible , later, after my funds have gone in , is a little unsettling, but was known, but what is more unsettling is to now find that the second charge could in fact instigate a default against the asset without the first charge having a say, that is very worrying.