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Post by batchoy on May 18, 2015 13:13:16 GMT
If they are want institutional money then they need to show that they on top of the loans and taking all necessary step to ensure the recovery of funds and payment of interest. I can't help wondering whether institutional lenders are subject to the same Ts&Cs that we retail lenders are. I'm specifically wondering about the order of payout in a default situation. The first priority is bound to be the return of capital in all cases, but what about after that? With us, we don't get a penny until after the platform have all their costs/fees/interest paid. This, unfortunately, creates a bit of a conflict of interest between the platform and retail lenders because the platform has a minimal direct financial incentive to wind matters up quickly. So I wonder whether institutional lenders would accept that payout order, or insist that any payout above the return of capital be shared proportionally rather than platform first, investor second. Going off slightly at a tangent, one thing that has always been a niggle and I have not seen it fully detailed in anybody's Ts&Cs is how is interest distributed in a default situation if there are insufficient funds to pay all the outstanding accrued interest and particularly so if the original loan was for payment of interest at term.
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mikes1531
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Post by mikes1531 on May 18, 2015 22:45:19 GMT
Going off slightly at a tangent, one thing that has always been a niggle and I have not seen it fully detailed in anybody's Ts&Cs is how is interest distributed in a default situation if there are insufficient funds to pay all the outstanding accrued interest and particularly so if the original loan was for payment of interest at term. It's probably going to depend on whether things like the 1-2% p.a. loan monitoring charge to AC and any loan 'set-up' charge are considered interest. I'd expect AC to call them 'fees', at which point they come ahead of accrued interest to lenders in the payout order. And, as near as I can tell, that would make the issue described by batchoy disappear.
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Post by batchoy on May 19, 2015 3:25:17 GMT
Going off slightly at a tangent, one thing that has always been a niggle and I have not seen it fully detailed in anybody's Ts&Cs is how is interest distributed in a default situation if there are insufficient funds to pay all the outstanding accrued interest and particularly so if the original loan was for payment of interest at term. It's probably going to depend on whether things like the 1-2% p.a. loan monitoring charge to AC and any loan 'set-up' charge are considered interest. I'd expect AC to call them 'fees', at which point they come ahead of accrued interest to lenders in the payout order. And, as near as I can tell, that would make the issue described by batchoy disappear. The situation I was thinking of was you had for example a 12 month loan at 10% interest with capital payable at term the loan defaults and goes on for at further 6 months at a default rate of 15% before it is settled through the use of an LPA receiver. However once all the fees and capital are paid/repaid there is insufficient funds to cover all the accrued interest, but there is sufficient to pay all of the term interest and some of the default interest. The question is therefore how is the interest distributed: Term first then default and in the case of the default by accrual date so that late comers to the defaulted loan get nothing, term first then default as a percentage, or the whole lot as a percentage or some other combination of repayment. Depending on how it is done has significant effects on the risks levels for the loan particularly if the loan is tradeable during the default period as many of AC's have been.
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mikes1531
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Post by mikes1531 on May 19, 2015 10:40:25 GMT
It's probably going to depend on whether things like the 1-2% p.a. loan monitoring charge to AC and any loan 'set-up' charge are considered interest. I'd expect AC to call them 'fees', at which point they come ahead of accrued interest to lenders in the payout order. And, as near as I can tell, that would make the issue described by batchoy disappear. The situation I was thinking of was you had for example a 12 month loan at 10% interest with capital payable at term the loan defaults and goes on for at further 6 months at a default rate of 15% before it is settled through the use of an LPA receiver. However once all the fees and capital are paid/repaid there is insufficient funds to cover all the accrued interest, but there is sufficient to pay all of the term interest and some of the default interest. The question is therefore how is the interest distributed: Term first then default and in the case of the default by accrual date so that late comers to the defaulted loan get nothing, term first then default as a percentage, or the whole lot as a percentage or some other combination of repayment. Depending on how it is done has significant effects on the risks levels for the loan particularly if the loan is tradeable during the default period as many of AC's have been. This is a question which, if not addressed by the Ts&Cs, would need to be answered by AC. I would hope that all accrued interest would be treated as a single amount and paid out proportionally. If it's done in an 'order of accrual' basis as described by batchoy then those who invest late suffer most. While that might seem reasonable, it would kill any aftermarket activity in distressed loans, or loans with the slightest hint of problems. So everyone would suffer, including early investors who would be unable to exit. IMHO dealing with accrued interest that way would be a disaster. Of course, for it to influence investors' behaviour, they have to be aware of the policy, so perhaps what's needed is a clear statement from AC of how they will operate.
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ramblin rose
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Post by ramblin rose on May 19, 2015 11:34:36 GMT
The situation I was thinking of was you had for example a 12 month loan at 10% interest with capital payable at term the loan defaults and goes on for at further 6 months at a default rate of 15% before it is settled through the use of an LPA receiver. However once all the fees and capital are paid/repaid there is insufficient funds to cover all the accrued interest, but there is sufficient to pay all of the term interest and some of the default interest. The question is therefore how is the interest distributed: Term first then default and in the case of the default by accrual date so that late comers to the defaulted loan get nothing, term first then default as a percentage, or the whole lot as a percentage or some other combination of repayment. Depending on how it is done has significant effects on the risks levels for the loan particularly if the loan is tradeable during the default period as many of AC's have been. This is a question which, if not addressed by the Ts&Cs, would need to be answered by AC. I would hope that all accrued interest would be treated as a single amount and paid out proportionally. If it's done in an 'order of accrual' basis as described by batchoy then those who invest late suffer most. While that might seem reasonable, it would kill any aftermarket activity in distressed loans, or loans with the slightest hint of problems. So everyone would suffer, including early investors who would be unable to exit. IMHO dealing with accrued interest that way would be a disaster. Of course, for it to influence investors' behaviour, they have to be aware of the policy, so perhaps what's needed is a clear statement from AC of how they will operate. I agree mikes1531. Those lenders who are willing to take on loans when they are at their riskiest point should definitely not be treated worse than those who were not prepared to. The default rate of interest accrual is arranged in order to recognise the higher risk those lenders are taking and there's an argument that says that should also be recognised in the sharing out of final interest even in the case where there is less to go round than would be needed.
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Post by batchoy on May 19, 2015 12:45:25 GMT
This is a question which, if not addressed by the Ts&Cs, would need to be answered by AC. I would hope that all accrued interest would be treated as a single amount and paid out proportionally. If it's done in an 'order of accrual' basis as described by batchoy then those who invest late suffer most. While that might seem reasonable, it would kill any aftermarket activity in distressed loans, or loans with the slightest hint of problems. So everyone would suffer, including early investors who would be unable to exit. IMHO dealing with accrued interest that way would be a disaster. Of course, for it to influence investors' behaviour, they have to be aware of the policy, so perhaps what's needed is a clear statement from AC of how they will operate. I agree mikes1531. Those lenders who are willing to take on loans when they are at their riskiest point should definitely not be treated worse than those who were not prepared to. The default rate of interest accrual is arranged in order to recognise the higher risk those lenders are taking and there's an argument that says that should also be recognised in the sharing out of final interest even in the case where there is less to go round than would be needed. Playing devils advocate, the paying only a percentage of all the accrued interest (term and default) raises the dilemma that investors in term interest payment loans are treated worse than monthly interest payment loans yet there appears to be no increase in the interest rate on term payment loans to reflect this.
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mikes1531
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Post by mikes1531 on May 19, 2015 17:57:06 GMT
I agree mikes1531. Those lenders who are willing to take on loans when they are at their riskiest point should definitely not be treated worse than those who were not prepared to. The default rate of interest accrual is arranged in order to recognise the higher risk those lenders are taking and there's an argument that says that should also be recognised in the sharing out of final interest even in the case where there is less to go round than would be needed. Playing devils advocate, the paying only a percentage of all the accrued interest (term and default) raises the dilemma that investors in term interest payment loans are treated worse than monthly interest payment loans yet there appears to be no increase in the interest rate on term payment loans to reflect this. That's not a lot different from the overall term vs. monthly interest situation where there appears to be no increase in the interest rate on term payment loans to reflect the fact that X% p.a. paid monthly produces a higher AER than X% rolled up and paid at the end of a loan. I wonder how many investors are aware of that effect and take it into account when deciding which loans to invest in? I certainly do, and that's why most of my P2P investments pay interest monthly.
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Post by chielamangus on Jan 10, 2016 7:51:35 GMT
Congratulations are due to AC for successfully sorting out this loan.
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mikes1531
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Post by mikes1531 on Jan 10, 2016 16:19:28 GMT
Congratulations are due to AC for successfully sorting out this loan. I'm going to save my congratulations until after the loan is repaid.
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Post by chielamangus on Jan 11, 2016 9:50:16 GMT
The term curmudgeonly springs to mind ....
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mikes1531
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Post by mikes1531 on Jan 11, 2016 11:38:30 GMT
The term curmudgeonly springs to mind .... The phrase that came to my mind had something to do with counting unhatched chickens. 
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Post by crabbyoldgit on Jan 11, 2016 11:41:32 GMT
Probably been on somebodys bananas and egg nog, well known mental side effect.
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jonno
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nil satis nisi optimum
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Post by jonno on Jan 11, 2016 11:59:41 GMT
The term curmudgeonly springs to mind .... The phrase that came to my mind had something to do with counting unhatched chickens. Ah! The @edthing thing. 
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Post by Butch Cassidy on Mar 17, 2016 11:22:27 GMT
Looks like finally this is going to be returned to lenders (within next 48 hours): Full capital + all accrued interest - Well done AC, good news
andrewholgate : Praise where praise is due 
EDIT: Back in account this morning 18/3/16 - Good work AC
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Bagman
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Post by Bagman on Mar 18, 2016 13:33:15 GMT
Congratulations are due to AC for successfully sorting out this loan. I'm going to save my congratulations until after the loan is repaid. It paid back at 7.20 this morning
Thank you AC
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