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Post by easteregg on Apr 26, 2014 13:04:32 GMT
Cherry-picking has been denied. But if FC decide they need to take say 20% of loans out of the auction pool, to keep rates down, and the way to achieve this is to offer a randomly-chosen 60% to the whole-loan pool, for 1/3 of those to be taken up and the rest kicked back to auction, then that's de-facto cherry-picking. This is a very interesting point that has probably been overlooked. Even if this was not planned, what would happen if the institutional investor decided a loan did not meet their criteria? Would it simply be offered in the normal auction process, or would the borrower be told that their loan was not funded?
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Post by aloanatlast on Apr 26, 2014 15:05:39 GMT
Even if this was not planned, what would happen if the institutional investor decided a loan did not meet their criteria? Would it simply be offered in the normal auction process, or would the borrower be told that their loan was not funded? According to the thread in the other place, if a loan is offered as a whole loan and not taken up, then it gets auctioned in bits in the normal way.
And vice versa, though the number of unfilled auctions can still be counted on three fingers.
Oh, and if it's a small loan the borrower might reject the fixed rate after a lender has gone for it, and try for a lower rate at auction, if he knows what he's doing.
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Post by GSV3MIaC on Apr 26, 2014 18:02:05 GMT
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Post by easteregg on Apr 26, 2014 19:43:32 GMT
I've always been a huge supporter of Funding Circle, but I think this is starting to take the "peer" away from "peer-to-business" lending.
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mikeb
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Post by mikeb on Apr 26, 2014 20:29:31 GMT
According to the thread in the other place, if a loan is offered as a whole loan and not taken up, then it gets auctioned in bits in the normal way.
Hmmm. "Is this a cherry I see before me?" ... "Ah, no it's a lemon". So it will definitely NOT lead to cherry picking. Just lemon-dropping. I see.
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blender
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Post by blender on Apr 26, 2014 21:36:36 GMT
I've always been a huge supporter of Funding Circle, but I think this is starting to take the "peer" away from "peer-to-business" lending. Agreed. FC need to be clear about what they are. Option 1. We facilitate peer to peer lending between individuals and businesses, we are an alternative to the banks and our services compete with bank lending. Option 2. We are a platform and credit assessment service which can be used to facilitate lending generally, including bank lending. With both the property loans, lending to buy to let owners of residential property, and with the provision of services to non-peer lenders we see option 2. emerging as the engine for growth - it seems in preference to direct advertising for peer lender cash.
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Post by transo on Apr 27, 2014 19:50:59 GMT
I'm not sure that "peer to peer" lending for FC has to be between "individuals" and "businesses". I'm quite happy if FC want to allow businesses to lend money to other businesses, I'm even quite happy if they let banks do so. What I want is that they lend as "peers" of the rest of us, i.e. via the same processes and systems. If they want to bid for loan parts (and if they want to bid for 25% of a loan or whatever the upper limit on loan part size is) I've got no problem, and I've got no problem if I lose out because they're prepared enough to bid at lower rates. I _am_ bothered if on some random selection of loans these other "peers" get to run the rule book over it and then decide to either take it (a cherry) or leave it to the rest of us (who are no longer "peers" but second class citizens) to see if we want to pick up. I think in the other place FC said it would be made clear if a loan had previously been offered as a whole loan but not taken up by one of these anonymous bidders. I would need a lot convincing to bid on any such loan, maybe if we stage a buyers strike FC will reconsider what "peer to peer" lending means.
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Post by yorkshireman on Apr 27, 2014 21:57:58 GMT
I'm not sure that "peer to peer" lending for FC has to be between "individuals" and "businesses". I'm quite happy if FC want to allow businesses to lend money to other businesses, I'm even quite happy if they let banks do so. What I want is that they lend as "peers" of the rest of us, i.e. via the same processes and systems. If they want to bid for loan parts (and if they want to bid for 25% of a loan or whatever the upper limit on loan part size is) I've got no problem, and I've got no problem if I lose out because they're prepared enough to bid at lower rates. I _am_ bothered if on some random selection of loans these other "peers" get to run the rule book over it and then decide to either take it (a cherry) or leave it to the rest of us (who are no longer "peers" but second class citizens) to see if we want to pick up. I think in the other place FC said it would be made clear if a loan had previously been offered as a whole loan but not taken up by one of these anonymous bidders. I would need a lot convincing to bid on any such loan, maybe if we stage a buyers strike FC will reconsider what "peer to peer" lending means. Well, I’m prepared to take on FC through a buyers strike but is anyone else?
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Post by gingergent on Apr 27, 2014 22:58:46 GMT
I think in the other place FC said it would be made clear if a loan had previously been offered as a whole loan but not taken up by one of these anonymous bidders. I would need a lot convincing to bid on any such loan, maybe if we stage a buyers strike FC will reconsider what "peer to peer" lending means. Whilst I hope they will make this clear, I'm not sure that there's much incentive for them to do so; I'll have to keep my eyes open when it's "officially" launched. Ignoring an all-out strike on these loans, the fact that someone with a proper risk management function (and I assume more detailed information than FC publishes) has considered and rejected it completely changes my view of the risk. I'm unlikely to bid as low on them as on a 'clean' application (assuming they look like something I'd bid on at all). I doubt I'm the only one to think like that. PS: It would be intersting to keep track of the loans that aren't taken up - both to see what ratio are 'acceptable' to the lenders and to track performance of the rejects vs others
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blender
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Post by blender on Apr 28, 2014 8:18:22 GMT
Not impressed with this move. Can only drive rates down and risk up. Just transferred a chunk of cash off the site and expect will do again as it accumulates uninvested. Happy to sit out for a while removing cash as it is repaid until such time as rates nudge back up and risk down. For all the PR, the key objective for P2P startups is to work towards a quick cash-in with an equity exit. My guess is that this will not drive rates down; more likely (I hope) the intention is to stabilise rates by not allowing them to rise so much when consumer lender cash is short, as has been the case recently. If the non-peer lenders are taking deposits at interest and lending to businesses through FC, then they will want a good margin to cover the risk of the unsecured loans. Maybe the benefit of whole loans is that in times of excess loans for the general market, as rates rise, a number of loans can be taken out and sold whole to leave a balance on the marketplace. This sort of safety valve will not work if the non-peer lenders are taking a set percentage of every loan, as suggested elsewhere, unless FC keep fiddling with the percentage. The corollory is that when there is excess consumer lender cash and rates go too low, then the MBR places a safe floor underneath rates. FC should be able to manage sustainable growth with stable rates in the current benign climate, and I reckon the venture capital investors will have been more concered than we have in have past few months. FC have now experienced unacceptable swings in both directions in the past year and probably need these rate-stabilising mechanisms before they can risk another push for growth.
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Post by davee39 on Apr 28, 2014 9:29:43 GMT
In march FC tested the market, listing > £6m loans in a week and the funding from lenders was not forthcoming. FC management may not be sensitive to lenders feelings, but they are not fools,neither are they running a charity or a mutual, they are in business for one reason - to maximize profit or returns from a business exit. I suspect that there is significant untapped loan demand which they cannot fulfill. Looking at the the growth of the smaller property backed sites there may be significant demand for property, reducing funds for unsecured borrowers.
Now, imagine you are an insurance company with millions to invest every week. Government Bond yields are tiny so business lending may be a lucrative alternative, they will be acting a bit like a Bank Manager approving a loan but without the worry over asset ratios etc. Once they have taken on 100 loans they can expect a yield of 6 - 8% across an average portfolio (FC figures).
Then look at the silly small loans (< £15k ) which fill in minutes down to minimum bid rate. I cannot fathom why a business borrows £6000 on FC for a car at much higher rates than a personal loan, I assume its tax avoidance. These loans might ultimately be excellent whole loans.
The grumble about lowering rates is that we would all love to get good loans at 14%, ideal material for the SM at +3%, but FC would not have a business long term at these rates.
There were huge complaints about MBR and Government lending, but FC listings have grown substantially offering much more choice.
So I am not about to join a bidding strike, but I do have a personal MBR somewhat higher than that enforced by FC (And for C- its above 15%).
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Post by chielamangus on Apr 28, 2014 11:43:06 GMT
Well, I’m prepared to take on FC through a buyers strike but is anyone else? A "strike" can only be effective if the vast majority of investors participate. Members of this forum are certainly a small minority of all FC investors in terms of numbers, and almost certainly in terms of amount invested. So one can only consult one's own interest as to whether to stay or go. Blender "My guess is that this will not drive rates down; more likely (I hope) the intention is to stabilise rates by not allowing them to rise so much when consumer lender cash is short, as has been the case recently". Stabilisation can only occur if FC knows the medium term equilibrium rate (it doesn't) and takes steps to push up rates when they are below the perceived equilibrium. In short, stabilisation is a con, and usually a mask for either pushing price/rates up or down, depending upon where the benefit lies for the organisation. However, I don't attribute this motive to FC. I think they foresee the eventual exit of large numbers of small to medium size investors and are preparing for the change in the market.
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Post by davee39 on Apr 28, 2014 12:00:29 GMT
In theory a market clears when the buyer and seller are satisfied by the agreed price. On a subsequent occasion the cleared price might be higher, or lower, this is normal. The only issue then with FC is that current higher rates make older lower rates look less attractive on the secondary market, but in most cases this can be resolved through Autobid. For anyone with spare cash choices must be made regarding the best place to invest and these include consideration of the foregone income waiting for things to improve. I am happy with anyone, on any of the platforms, doing anything they like, but the discontented will not move the market. The market will rise from a low when the flippers get burned and stop investing (gambling).
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fasty
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Post by fasty on May 11, 2014 21:26:42 GMT
At the time of writing, the "statistics" page on FC tells that that there are 58 live auctions, but the "loan requests" page tells me that there are only 50. Am I missing something obvious, or does this discrepancy suggest that there might perhaps be 8 live whole loan auctions going on?
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Post by GSV3MIaC on May 12, 2014 8:03:14 GMT
If there are, they are not exactly flying off the shelves are they, unless they were fully bought and just waiting for agreements etc. We're over 1/3rd of the way thru the trial now...
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