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Post by earthbound on Jun 2, 2016 11:51:33 GMT
It looks possible that the provision fund may soon become tested due to the latest default. I am not fully up to scratch on how the PF will/does work other than it is kept at 2% of the loanbook and would be used to reimburse lost capital.
My questions are
A. should the PF be used to cover lost interest?
B. when the loan book drops is money removed from the fund, if so where to?
C. The PF i assume is kept in an account that earns interest, what happens to it?
D. Is the PF a saving stream asset?
E. Should the PF cover any parts of the loan bought after it defaulted?
Sorry for so many questions, please don't feel obliged to answer them all.
Any thoughts would be welcome.
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archie
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Post by archie on Jun 2, 2016 11:56:33 GMT
Another question to add :-
E. Should the PF cover any parts of the loan bought after it defaulted?
Easy answer would be 'No' but then SS couldn't claim that nobody had lost money so not so straight forward.
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Post by earthbound on Jun 2, 2016 11:59:33 GMT
Another question to add :- E. Should the PF cover any parts of the loan bought after it defaulted? Easy answer would be 'No' but then SS couldn't claim that nobody had lost money so not so straight forward. And done thanks archie
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Post by dualinvestor on Jun 2, 2016 12:50:49 GMT
It looks possible that the provision fund may soon become tested due to the latest default. I am not fully up to scratch on how the PF will/does work other than it is kept at 2% of the loanbook and would be used to reimburse lost capital. My questions are A. should the PF be used to cover lost interest? B. when the loan book drops is money removed from the fund, if so where to? C. The PF i assume is kept in an account that earns interest, what happens to it? D. Is the PF a saving stream asset? E. Should the PF cover any parts of the loan bought after it defaulted? Sorry for so many questions, please don't feel obliged to answer them all. Any thoughts would be welcome. C&D are questions only savingstream can answer, anyone else is speculating A That is up to the people who control the PF, of course others can have an opinion but that is all it will be B Probably treated as a "deferred arrangement fee" if not called upon but that is my guess only savingstream know E As A except people may or may not have strong opinions. IMO it would be dfficult for the people who control the PF to distinguish between lenders. NB I have used the term "people who control the PF" deliberately, not "trustees of the PF" or something similar as there is no evidence that the PF is in any way a trust (either formal or bare)
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lofty
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Post by lofty on Jun 2, 2016 12:51:04 GMT
Another question to add :- E. Should the PF cover any parts of the loan bought after it defaulted? Easy answer would be 'No' but then SS couldn't claim that nobody had lost money so not so straight forward. Thats a good question. I think its a perfectly reasonable line to say to people, "hey, you could see the loan had defaulted and yet you still chose to invest, you knew the risk", I also think that investors prior to the default have a valid claim to getting their share back first. But, immediately contradicting myself, the red banner does say interest will continue to accrue, so some people may claim that the procedure regarding a default was not spelled out. As you said SS would like to carry on saying that no investor has lost money, so lets see how they use the word discretionary. P.S. I have no involvement in this loan, so I'm neutral in this. Highly opinionated, but neutral... 
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ben
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Post by ben on Jun 2, 2016 13:28:30 GMT
I dont think investors have much to worry about getting the capital back its the interest that is more unclear. If there is enough to cover the interest then they will get it but if there is not it is still unclear if SS will cover that or just cover up to what was invested.
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goopy
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Post by goopy on Jun 2, 2016 13:38:44 GMT
Personally I don't think that a provision fund should cover interest at all. If a loan is defaulted you should think yourself lucky to get all of your capital back.
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Post by portlandbill on Jun 2, 2016 14:22:12 GMT
why be lucky? isn't that what the 70% LTV is all about? to avoid "luck"
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Liz
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Post by Liz on Jun 2, 2016 14:39:06 GMT
why be lucky? isn't that what the 70% LTV is all about? to avoid "luck" It depends what the original valuation is based on.
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goopy
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Post by goopy on Jun 2, 2016 14:45:32 GMT
why be lucky? isn't that what the 70% LTV is all about? to avoid "luck" Ahh, so our capital is not at risk then? That's brilliant!!! 
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j
Member of DD Central
Penguins are very misunderstood!
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Post by j on Jun 2, 2016 14:56:25 GMT
why be lucky? isn't that what the 70% LTV is all about? to avoid "luck" Looking at the (possible) outcome of some defaulted loans with ltv around this figure (not necessarily on SS), 70% is not a level I would be comfortable with anymore (in general)
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mikes1531
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Post by mikes1531 on Jun 2, 2016 15:02:25 GMT
A. should the PF be used to cover lost interest? B. when the loan book drops is money removed from the fund, if so where to? C. The PF i assume is kept in an account that earns interest, what happens to it? D. Is the PF a saving stream asset? E. Should the PF cover any parts of the loan bought after it defaulted? A. If SS value their reputation and being able to say "No SS investor has ever lost a penny" then yes, but it's up to them to decide how much they're willing to pay for that. B. It seems to be. The PF balance always has been reported to be 2% of the total loan book. I presume withdrawals are returned to where they came from, which most likely is SS/Lendy working capital. C. It ought to be treated as a client money account. In the current rate environment, if the account earns interest it would be minimal. Any interest earned would end up back in SS/Lendy working capital because of B. D. It might be, but it should be pledged to investors and not attackable if the platform fails, so it ought not be important whether it is or isn't as long as it's kept aside for the benefit of investors. (An interesting situation would be if the platform failed and the loan book was run down to nothing as loans matured. If net defaults were less than PF assets, what would happen to the remaining PF assets? Would they then revert to SS/Lendy's creditors?) E. Yes. I have enough trouble understanding why anyone would buy PBL020 parts at the moment. If the red warning were to be strengthened by saying there'd be no PF support, there'd be even less reason to buy. Surely that would kill the market for parts of defaulted loans. Anybody buying defaulted parts at par may have been warned about the situation, but that won't stop complaints when losses occur. Broader use of the PF might keep more people happy. I should add that all the above is AIUI and I'm certainly no expert. Or perhaps I should say it's all JMHO. 
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Post by portlandbill on Jun 2, 2016 15:06:23 GMT
why be lucky? isn't that what the 70% LTV is all about? to avoid "luck" Ahh, so our capital is not at risk then? That's brilliant!!! yep, that's my (rather naive) understanding of the reason to have a LTV specified, isnt it?
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mikes1531
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Post by mikes1531 on Jun 2, 2016 15:11:27 GMT
Taking into consideration that Lendy/SS have been reducing the PF back down to around 2% coverage as loans are redeemed, unless I am missing something, what isn't clear is; if the PF were to be used to compensate either or both capital & interest in this or any other case, what means would be employed for it to be brought back up to cover 2% of the current loan book. From the SS Forum FAQ... The last sentence is based on SS posting(s) in the forum. (I can't find it quickly at the moment, but I did find it not that long ago.) EDIT: Found it! p2pindependentforum.com/post/106927/thread
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goopy
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Post by goopy on Jun 2, 2016 15:20:23 GMT
yep, that's my (rather naive) understanding of the reason to have a LTV specified, isnt it? That is correct. However there are many other factors to be taken into consideration. The 70% LTV is for the full value of the site, if you want a quick sale the price has to drop (the macbeth loan is being advertised for 1.9m and the value is supposedly 2.43m). At this discounted price it should sell quickly but if the sale drags on then so do the costs. If I was in this loan I would be more than happy to get my capital back.
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