Liz
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Post by Liz on May 28, 2016 15:49:30 GMT
I wondered what value investors placed on the provision fund, and if people would want to take a lower return, in exchange for a larger provision fund.
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Post by Deleted on May 28, 2016 15:55:32 GMT
The provision fund is only a (small) part of the package.
Remember we already have a (minimum) 30% coverage in the difference between the estimated value and the borrowed money (LTV max=70%).
So, I would prefer a higher percentage and no provision fund if it come to that.
But it is far more important to keep up with good solid (and INDEPENDENT) valuations.
I would very much like to see valuations done for SS (and not for the borrowers).
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Liz
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Post by Liz on May 28, 2016 16:25:41 GMT
The provision fund is only a (small) part of the package. Remember we already have a (minimum) 30% coverage in the difference between the estimated value and the borrowed money (LTV max=70%). So, I would prefer a higher percentage and no provision fund if it come to that. But it is far more important to keep up with good solid (and INDEPENDENT) valuations. I would very much like to see valuations done for SS (and not for the borrowers). 30% coverage! That's a bast case seneriao, and before any property decline. If you think 30% coverage is more than enough of a buffer, you might take 14% with no provision fund. Others might take 10%, with added security.
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Liz
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Post by Liz on May 28, 2016 16:30:42 GMT
Impossible to say without details of the proposal and an LTV on the security, but the PF isn't a primary consideration when making my investment decisions, and would cease to be until if or when the loan ran into problems. No it's not, if 3 platforms took 1/3rd of SS loans, which would you invest in?
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Liz
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Post by Liz on May 28, 2016 16:38:44 GMT
No it's not, if 3 platforms took 1/3rd of SS loans, which would you invest in? I'll reiterate - None of them without having the full picture. Your assumption is made on every investor being in on every loan, which is not the case. I am talking in general, not a specific loan. ie all the loans you have on SS, would you take an option by SS to forego a PF for a higher rate ? Or if you like SS had 3 platforms and offered all loans on different terms; 1) 14%, no PF 2) 12% and 2% PF 3) 10% and 4% PF
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Post by brianac on May 28, 2016 16:48:29 GMT
Happy with the Status Quo.
Brian
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Post by earthbound on May 28, 2016 17:01:52 GMT
i voted for 12% and 2% and i'm happy BUT.. sorry to be awkward, but i would be even happier with 11% and a 3%  |
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Liz
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Post by Liz on May 28, 2016 17:07:12 GMT
i voted for 12% and 2% and i'm happy BUT.. sorry to be awkward, but i would be even happier with 11% and a 3% It seems most like risk. And are more interested in return on capital, than return of capital I think more polls to follow
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cooling_dude
Bye Bye's for the PPI
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Post by cooling_dude on May 28, 2016 17:08:29 GMT
i voted for 12% and 2% and i'm happy BUT.. sorry to be awkward, but i would be even happier with 11% and a 3%
I think more polls to follow Be Careful Liz... It's very addictive 
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mikes1531
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Post by mikes1531 on May 28, 2016 18:18:46 GMT
Remember we already have a (minimum) 30% coverage in the difference between the estimated value and the borrowed money (LTV max=70%). 30% coverage! That's a bast case seneriao, and before any property decline. Even without any general decline in the property market, a substantial discount from 'market value' often is required in order to sell a property in receivership -- and particularly so if a property is unique in any way. In many cases, a valuer is asked to provide a 'market value' and a value based on an assumption of a sale within 180 days. When they do, the discount they expect to be needed in order to facilitate a relatively quick sale can be eye-watering. And with accrued interest and receivers' and lawyers' fees/costs mounting up as the recovery process drags on, the apparent 30% 'cushion' can disappear in a hurry.
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mikes1531
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Post by mikes1531 on May 28, 2016 18:27:05 GMT
I voted for the status quo, but I'd much rather that SS put the 2% into the PF and left it there when a loan repaid rather than withdrawing it as they do now. I'd like to see the PF grow over time -- if the 2% allowance turns out to be enough to allow that to happen -- or shrink if the 2% is insufficient. At least that way, I could see what's happening. As it is now, we have to trust SS/Lendy to top up the PF if there are any PF payouts, and I haven't a clue whether or not their finances can support such a commitment, so I don't know whether the current incarnation of the PF is viable over the long term.
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tx
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Post by tx on May 28, 2016 18:27:05 GMT
Why need the provision fund if you can effectively manage your own risk? 70% LTV is giving 30% provision already. I vote for higher return and my own effective risk management.
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Post by earthbound on May 28, 2016 18:46:29 GMT
i voted for 12% and 2% and i'm happy BUT.. sorry to be awkward, but i would be even happier with 11% and a 3% It seems most like risk. And are more interested in return on capital, than return of capital I think more polls to follow 12% and 2% seems to be the popular one at the moment, which i suppose would suggest SS have it about right. I'm not of that ilk, i would much prefer full return of capital from a distressed loan than an extra 2% pa and a risk of a rubbish return from a distressed loan, that's why i would rather see a far larger PF along the lines of ratesetter, a PF that would be fit for purpose, the PF balance at the moment is £2m, IMO no where near enough to bail out a couple of big loans if they were to default.
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ben
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Post by ben on May 28, 2016 18:55:03 GMT
Why need the provision fund if you can effectively manage your own risk? 70% LTV is giving 30% provision already. I vote for higher return and my own effective risk management. In most of the cases the valuation may be accurate as they stand on that day. But many things can change, property prices, the borrorower might be difficult and could take years going through the courts and all the value used on legal fees, the borrorower might cause damage to the asset so lowering its value and multiple other reasons why the value may be nowhere near the orginal estimate.
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registerme
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Post by registerme on May 28, 2016 18:59:24 GMT
I voted for 14%, not because I necessarily think a yield like that is more attractive, or 2% more attractive than having a provision fund, but more because I place no value on the provision fund.
(It obviously has some value, but given that we don't know in what circumstances it might pay out, or how much it might pay out, or whether it could cover an entire loss, or.... and so on and so fourth I just fund it simply, and much more conservative (probably too conservative) to allow it a value of zero).
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