tx
Member of DD Central
Posts: 300 
Likes: 127
|
Post by tx on May 28, 2016 14:38:20 GMT
I didn't buy, I sold; but I do hold 'negative days' parts. Historically SS have been poor ('lousy') at keeping the 'days left' numbers up to date, and at one point nearly half the loans on the platform were negative days, iirc. But they were still paying interest, they had just overrun on repaying the capital .. 'it happens'. You have to decide if you'd rather have £500 in each of two loans, one of which is 'late' or all £1k in the one which isn't late .. or maybe check the details and see which one has a value you can extract your 70% from with some confidence, if you need to. Personally I hate the ones that repay early more than the ones which repay late (as long as they DO repay!) .. it means I have to wake up, log in, and find something else to do with the unexpected cash. Easy for me (small amounts) but tough for the £200k-per-loan guys/gals. That is probably why many are hanging onto PBL020 .. no-place to put it, even if they could sell, and maybe why some folks are even buying it ('probable 12% better than certain 0%'). That make sense indeed if I have 200k on SS, or even 200k per loan ... wow. That is a different ball game.
|
|
mikes1531
Member of DD Central
Posts: 6,453
Likes: 2,320
|
Post by mikes1531 on May 28, 2016 17:12:22 GMT
There again are SS or Lendy going to guarantee to cough up out of the 'provision' fund? If they are, we might as well all keep our lending until the end as we are guaranteed our money back. It would certainly slow down the mass selling on the secondary market. As I have mentioned before on this site I am not sure SS should and will pay out for everything eg on a small loan in default they may only need to pay out £30-£40k but on large ones could easily be £500k plus - two of them and all the protective fund has gone and would probably put SS into higher risk investment band again? Hopefully their decision will be on a case by case basis and I think could be a crucial point if PBL 020 does not achieve 70% LTV (as per valuation?!)return. : AIUI, SS cannot 'guarantee' any payout from the PF -- those payouts have to be 'discretionary' in order not to be classified as insurance and come under regulations that apply to insurance. At this point, SS say there is over £2M in the PF, so it could stand more than two £500k losses. But I've never understood exactly how the PF is funded. SS say they put 2% of every loan into the PF. Most other platforms would let that amount roll up, so that successful loans would fund recoveries on the failures. In that situation, investors can look at the PF and watch the balance (as a percentage of the loan book) go up when loans are successfully concluded and go down as PF payouts are made. They can then make a judgement as to whether they think the amount it contains is adequate. SS don't work that way. If a loan is successfully repaid, SS withdraw from the PF the 2% associated with that loan. They have said that if the PF ever paid out on a less-than-successful loan, they would top up the PF to bring it's balance back to 2% of the outstanding loan book. That would be fine as long as they have the resources to do that, but we don't have a clue whether or not they do have those resources. If the proceeds from the PBL020 liquidation are insufficient, I would expect there to be great pressure on the PF trustees to authorise a payout to investors for the simple reason that it would allow SS to continue to say that no SS investor has suffered a loss, and that has to be worth a huge amount when trying to encourage investors. If the liquidation process takes a long time -- and IMHO that's quite possible -- then the trustees will have to decide whether any payout would include accrued interest. If they don't, then there will be questions raised over whether SS can, or can't, claim that investors haven't sustained losses. ('probable 12% better than certain 0%') : Unfortunately, the choice is not that simple. The 'probable 12%' option is really 'probable 12% plus a risk of loss of capital'. In which case the decision isn't an obvious one.
|
|
|
|
Post by GSV3MIaC on May 28, 2016 17:16:29 GMT
('probable 12% better than certain 0%') : Unfortunately, the choice is not that simple. The 'probable 12%' option is really 'probable 12% plus a risk of loss of capital'. In which case the decision isn't an obvious one. Given that the loan is to SS/\Lendy, and they are committed (in several places) to paying it (at least the capital), and the PF is larger that the possible loss anyway, I think I stand by my original comment. If the loan was 'new T&Cs' then there would be a larger chance of capital loss. The jury is still out as to whether the interest is guaranteed or not. The 'interest on the interest' is probably a lost cause though.
|
|
Liz
Member of DD Central
Posts: 2,426
Likes: 1,297
|
Post by Liz on May 28, 2016 17:24:35 GMT
GSV3MIaC : Unfortunately, the choice is not that simple. The 'probable 12%' option is really 'probable 12% plus a risk of loss of capital'. In which case the decision isn't an obvious one. Given that the loan is to SS/\Lendy, and they are committed (in several places) to paying it (at least the capital), and the PF is larger that the possible loss anyway, I think I stand by my original comment. If the loan was 'new T&Cs' then there would be a larger chance of capital loss. The jury is still out as to whether the interest is guaranteed or not. The 'interest on the interest' is probably a lost cause though. What happens if several other loans also default? The PF is not so secured.
|
|
cooling_dude
Bye Bye's for the PPI
Posts: 2,853
Likes: 4,298
|
Post by cooling_dude on May 28, 2016 17:29:23 GMT
Given that the loan is to SS/\Lendy, and they are committed (in several places) to paying it (at least the capital), and the PF is larger that the possible loss anyway, I think I stand by my original comment. If the loan was 'new T&Cs' then there would be a larger chance of capital loss. The jury is still out as to whether the interest is guaranteed or not. The 'interest on the interest' is probably a lost cause though. What happens if several other loans also default? The PF is not so secured. Well, yes, but you're talking about absolute worst case scenario where the security can't be sold for some reason... In reality, SS will be able to sell the security for something. So there will be money available before they have to tap into the PF.
|
|
|
|
Post by GSV3MIaC on May 28, 2016 18:52:23 GMT
If 'several other loans default' it doesn't matter whether you are in PBL020 or one of the others. I am sure we can construct massive disaster scenarios .. what happens if Southampton washes away or ... However PBL020 of itself ought not be unduly troubling for SS, and I expect lenders will get their cash in this case. However I still sold my meagre holding .. meagre mostly because 'the cheque was in the post' for many many weeks now, and I'd pretty much lost patience.
|
|
|
|
Post by earthbound on May 28, 2016 19:24:41 GMT
What happens if several other loans also default? The PF is not so secured. Well, yes, but you're talking about absolute worst case scenario where the security can't be sold for some reason... In reality, SS will be able to sell the security for something. So there will be money available before they have to tap into the PF. Hi dude. this is something i have thought about a few times and mrclondon came up with a very good scenario, so i'm not going to try and take any credit for this, but i just altered it a little to see what the result would be. Lets assume a downturn in the property market and the economy, 2008. The 3 loans below default, but SS does a good job in light of the situation and recovers 60% of the LTV of all 3 loans. So the PF only has to cover 10% of each loan plus cost's and fees, generally accepted to be 10% . if you take the biggest 3 loans at SS @70%ltv pbl001 £6,063,750 pbl084 £4,650,000 pbl093 £3,780,000 total £14,493,750 x 10% £1,449,375 + costs and fees @10% £1,449,375 total needed from provision fund £2,898,750 The provision fund at the moment is £2,021,261 And in a 2008 type downturn, the recovery rate may only be 50%. I suppose what we have to ask ourselves is .... is it a bit far fetched to expect a downturn, and 3 loans defaulting at the same time? IMHO If/when a downturn does happen,(depending on how large the correction is) it could actually be worse than this. edit.. should point out that this is in regard to platform sustainability, re Lenders panic.
|
|
ben
Posts: 2,020
Likes: 589
|
Post by ben on May 28, 2016 19:33:30 GMT
Providing you were well diversified you would in that scenerio you would still end up with about 7/8% on investment obviously if it was worse the ending figures would be a lot worse.
|
|
|
|
Post by earthbound on May 28, 2016 19:36:16 GMT
Providing you were well diversified you would in that scenerio you would still end up with about 7/8% on investment obviously if it was worse the ending figures would be a lot worse. hi ben, i posted this not as a loss scenario to lenders , but as a threat to platform sustainability. sorry, i really should have mentioned that in the original post, ill edit now.
|
|
cooling_dude
Bye Bye's for the PPI
Posts: 2,853
Likes: 4,298
|
Post by cooling_dude on May 28, 2016 19:43:48 GMT
Well, yes, but you're talking about absolute worst case scenario where the security can't be sold for some reason... In reality, SS will be able to sell the security for something. So there will be money available before they have to tap into the PF. Hi dude. this is something i have thought about a few times and mrclondon came up with a very good scenario, so i'm not going to try and take any credit for this, but i just altered it a little to see what the result would be. Lets assume a downturn in the property market and the economy, 2008. The 3 loans below default, but SS does a good job in light of the situation and recovers 60% of the LTV of all 3 loans. So the PF only has to cover 10% of each loan plus cost's and fees, generally accepted to be 10% . if you take the biggest 3 loans at SS @70%ltv pbl001 £6,063,750 pbl084 £4,650,000 pbl093 £3,780,000 total £14,493,750 x 10% £1,449,375 + costs and fees @10% £1,449,375 total needed from provision fund £2,898,750 The provision fund at the moment is £2,021,261 And in a 2008 type downturn, the recovery rate may only be 50%. I suppose what we have to ask ourselves is .... is it a bit far fetched to expect a downturn, and 3 loans defaulting at the same time? IMHO If/when a downturn does happen,(depending on how large the correction is) it could actually be worse than this That is certainly a worst case scenario  , all those 70% LTV loans defaulting at the same time, and SS only being able to recover 60% on each loan (even if the provision fund had an additional 1mill, you could just add the next largest loan, and so on and on...However, I'm not disagreeing with your post. It's important to remember, every time we invest in a loan that our capital is at risk, that the worst could happen and we could lose all money. SS have set up a safeguard but that is no excuse to be complacent with the platform. Edit... PBL001; do yo mean DFL001? That's a different kettle of fish altogether being a DFL!
|
|
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
|
Post by ilmoro on May 28, 2016 19:46:52 GMT
what happens if Southampton washes away or ... It will disrupt my evening & Ill be swimming home :-D
|
|
|
|
Post by earthbound on May 28, 2016 19:59:52 GMT
Hi dude. this is something i have thought about a few times and mrclondon came up with a very good scenario, so i'm not going to try and take any credit for this, but i just altered it a little to see what the result would be. Lets assume a downturn in the property market and the economy, 2008. The 3 loans below default, but SS does a good job in light of the situation and recovers 60% of the LTV of all 3 loans. So the PF only has to cover 10% of each loan plus cost's and fees, generally accepted to be 10% . if you take the biggest 3 loans at SS @70%ltv pbl001 £6,063,750 pbl084 £4,650,000 pbl093 £3,780,000 total £14,493,750 x 10% £1,449,375 + costs and fees @10% £1,449,375 total needed from provision fund £2,898,750 The provision fund at the moment is £2,021,261 And in a 2008 type downturn, the recovery rate may only be 50%. I suppose what we have to ask ourselves is .... is it a bit far fetched to expect a downturn, and 3 loans defaulting at the same time? IMHO If/when a downturn does happen,(depending on how large the correction is) it could actually be worse than this That is certainly a worst case scenario , all those 70% LTV loans defaulting at the same time, and SS only being able to recover 60% on each loan (even if the provision fund had an additional 1mill, you could just add the next largest loan, and so on and on...However, I'm not disagreeing with your post. It's important to remember, every time we invest in a loan that our capital is at risk, that the worst could happen and we could lose all money. SS have set up a safeguard but that is no excuse to be complacent with the platform. Edit... PBL001; do yo mean DFL001? That's a different kettle of fish altogether being a DFL! hi dude .. yes corrected  Its only a vague scenario of what could/may happen, my main point was, is it a plausible scenario?
|
|
mikes1531
Member of DD Central
Posts: 6,453
Likes: 2,320
|
Post by mikes1531 on May 28, 2016 20:04:33 GMT
In reality, SS will be able to sell the security for something. So there will be money available before they have to tap into the PF. Lets assume a downturn in the property market and the economy, 2008. The 3 loans below default, but SS does a good job in light of the situation and recovers 60% of the LTV of all 3 loans. So the PF only has to cover 10% of each loan plus cost's and fees, generally accepted to be 10% . if you take the biggest 3 loans at SS @70%ltv pbl001 £6,063,750 pbl084 £4,650,000 pbl093 £3,780,000 total £14,493,750 x 10% £1,449,375 + costs and fees @10% £1,449,375 total needed from provision fund £2,898,750 The provision fund at the moment is £2,021,261 And in a 2008 type downturn, the recovery rate may only be 50%. I suppose what we have to ask ourselves is .... is it a bit far fetched to expect a downturn, and 3 loans defaulting at the same time? IMHO If/when a downturn does happen,(depending on how large the correction is) it could actually be worse than this I have similar concerns to those expressed by earthbound. I would add... - The reference to PBL001 ought to be to DFL001
- The numbers quoted for those loans are the loan amounts, not the security 'value'. The total value actually is a lot higher -- £20.7M. So if the proceeds come to 60% of value, the shortfall would be 10% of value -- which would be £2.07M instead of £1.45M.
- I haven't a clue whether the 10% suggested for fees/costs should be 10% of the loan balance, the security 'value', or the sale proceeds.
- Since DFL001 is a DFL, the amount actually advanced to the borrower would be £6.06M only when the project is nearly finished. At the moment, ISTM that only about £3M has been advanced.
- That's the good news. The bad news is that a half-finished project is unlikely to be worth as much as half of the value of the project if completed.
- And some more bad news... It doesn't take a big downturn like 2008 to cause sale proceeds to be significantly below 'value'. Properties in receivership generally do not sell for as much as their 'value', even in the best circumstances. They're often sold in a hurry in order to wrap things up before the costs/fees/accrued interest become overwhelming, and rushed sales do not generally achieve the prices that would be achievable if a seller could be patient and wait for the right buyer to come along. This is not to say that a quick sale won't produce the best result for all concerned, just that a balance has to be struck between holding out for the best possible price and keeping costs/fees under control.
|
|
|
|
Post by earthbound on May 28, 2016 20:10:26 GMT
Lets assume a downturn in the property market and the economy, 2008. The 3 loans below default, but SS does a good job in light of the situation and recovers 60% of the LTV of all 3 loans. So the PF only has to cover 10% of each loan plus cost's and fees, generally accepted to be 10% . if you take the biggest 3 loans at SS @70%ltv pbl001 £6,063,750 pbl084 £4,650,000 pbl093 £3,780,000 total £14,493,750 x 10% £1,449,375 + costs and fees @10% £1,449,375 total needed from provision fund £2,898,750 The provision fund at the moment is £2,021,261 And in a 2008 type downturn, the recovery rate may only be 50%. I suppose what we have to ask ourselves is .... is it a bit far fetched to expect a downturn, and 3 loans defaulting at the same time? IMHO If/when a downturn does happen,(depending on how large the correction is) it could actually be worse than this I have similar concerns to those expressed by earthbound . I would add... - The reference to PBL001 ought to be to DFL001
- The numbers quoted for those loans are the loan amounts, not the security 'value'. The total value actually is a lot higher -- £20.7M. So if the proceeds come to 60% of value, the shortfall would be 10% of value -- which would be £2.07M instead of £1.45M.
- I haven't a clue whether the 10% suggested for fees/costs should be 10% of the loan balance, the security 'value', or the sale proceeds.
- Since DFL001 is a DFL, the amount actually advanced to the borrower would be £6.06M only when the project is nearly finished. At the moment, ISTM that only about £3M has been advanced.
- That's the good news. The bad news is that a half-finished project is unlikely to be worth as much as half of the value of the project if completed.
- And some more bad news... It doesn't take a big downturn like 2008 to cause sale proceeds to be significantly below 'value'. Properties in receivership generally do not sell for as much as their 'value', even in the best circumstances. They're often sold in a hurry in order to wrap things up before the costs/fees/accrued interest become overwhelming, and rushed sales do not generally achieve the prices that would be achievable if a seller could be patient and wait for the right buyer to come along. This is not to say that a quick sale won't produce the best result for all concerned, just that a balance has to be struck between holding out for the best possible price and keeping costs/fees under control.
hi mikes1531 the reason i posted this was i have first hand experience of the 2008 downturn, property developing, (small scale) i was very lucky taking only a 6K hit on 2 properties , that i would point out were bargains when i bought them at auction in 2007. 
|
|
|
|
Post by earthbound on May 28, 2016 20:14:45 GMT
I would also add that the valuation of a property is not worth the paper its written on in a downturn, the properties value is determined completely by what a rare buyer is willing to offer you, and when your wanting to move property on quickly, a downturn usually means hefty loss's.
|
|
, all those 70% LTV loans defaulting at the same time, and SS only being able to recover 60% on each loan (even if the provision fund had an additional 1mill, you could just add the next largest loan, and so on and on...
Its only a vague scenario of what could/may happen, my main point was, is it a plausible scenario?