r00lish67
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Post by r00lish67 on Oct 25, 2016 3:46:12 GMT
Good list - they do seem to be biting off more than they can chew, but then I've been saying that since Easter. I can remember those halcyon days in late 2015 when we'd all have to set our watches to ensure we received our small chunk of loan, how times change.
Whilst not in FS's interest to go back to FFF, you'd think it's probably a little too far the other way to have an endless stream of pretty chunky loans that take yonks to fill (if ever). It feels like half of Londonderry is on loan through FS! Then again, that probably still makes more profit then tiny pawn items filling in nanoseconds, I guess.
I'm not 100% sure of the answer re: what happens if they don't fill. If it's a renewal, then the original lenders are stuck with it until alternative finance is arranged or the asset sold. This is happening right now with the R****n land loan.
If it's a brand new loan, then I seem to recall a 30 day limit being mentioned, but basically it'll be whenever FS and/or the borrower lose the will to carry on seeking funding from FS and go elsewhere. Not good for FS though as they'll then have to pay interest to the lenders who committed funds.
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mikes1531
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Post by mikes1531 on Oct 25, 2016 11:20:07 GMT
I'm not 100% sure of the answer re: what happens if they don't fill. If it's a brand new loan, then I seem to recall a 30 day limit being mentioned, but basically it'll be whenever FS and/or the borrower lose the will to carry on seeking funding from FS and go elsewhere. Not good for FS though as they'll then have to pay interest to the lenders who committed funds. The failure to fund a loan also damages FS's reputation as a reliable lender. Once all the paperwork has been signed and the borrower is waiting for their money, FS have a bit of an obligation to come up with the goods. While I expect there is a clause in their loan agreement that would give them an out if the loan doesn't fund, I'd expect them to be loathe to use it because of the damage it would cause to their reputation. One thing FS could do to solve the situation would be to bring in underwriters. It's best used when a loan is mostly funded. It's not a cheap solution, but they've done it in the past. It appears they may have done it recently to push the Isle of Wight loan out the door.
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spyrogyra
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Post by spyrogyra on Oct 25, 2016 23:16:13 GMT
With this list I wanted to make a point. And the point is that due to the current structure of the SM and the avalanche of renewals coming up during the next few months,FS won't be able to fill the loans quickly. This is so obvious now. There's also the problem of double interest being paid to lenders during renewals (all lenders in the old loan still receive interest during renewals, plus those committing funds to replace the lenders that opted out of the renewals). I asked who's paying the double interest and I haven't received an answer. If it is the borrower, this extra interest is exhausting their finances, thus posing a higher risk of default. As I am into quite a few of the property loans, I am concerned that both lenders and borrowers may become entrapped in the renewals. The risk is even greater with loans where there's a development element and the borrowers rely on further tranches. Failure to fill these tranches will be a nightmare for all. I may decide to update this list or at least highlight the slowest. Just to keep banging about the need of some decisive action to avoid the domino effect.
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littleoldlady
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Post by littleoldlady on Oct 26, 2016 6:23:46 GMT
There may be a disaster looming. One partial solution might be to suspend the SM so that any new money went into filling loans rather than allowing lenders to escape by selling at a discount.
How would this go down?
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sqh
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Post by sqh on Oct 26, 2016 7:10:54 GMT
There may be a disaster looming. One partial solution might be to suspend the SM so that any new money went into filling loans rather than allowing lenders to escape by selling at a discount. How would this go down? Very Badly. Being able to sell at a discount is a fundamental feature of FS, and I believe it is a requirement of FCA full approval. It would be crazy to disable it. I have recently picked up some bargains on the SM.
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sqh
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Post by sqh on Oct 26, 2016 7:46:10 GMT
Interesting list spyrogyra . What happens to a loan if they can't manage to fund it completely? They use underwriting. If you look at the Hull loan you see that it was activated on 19th October, even though the loan didn't fill until last night.
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SteveT
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Post by SteveT on Oct 26, 2016 7:57:39 GMT
Given that FS are already offering rates of 18% plus 1% CB for >£250k (Birkenhead), one has to wonder how much further they could go to entice underwriters.
The single biggest thing that FS can do to reawaken platform liquidity is to get some of the long overdue large loans to REPAY ! There are several new loans that I'd willingly bid for, if I could only retrieve some of the funds that are already locked up.
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sqh
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Post by sqh on Oct 26, 2016 10:06:21 GMT
Given that FS are already offering rates of 18% plus 1% CB for >£250k (Birkenhead), one has to wonder how much further they could go to entice underwriters. I doubt if underwriters get more than about 15%, because they don't hold the loans for the full term. However, I think some underwriters do hold the loans for the full term (same rate as normal lenders), you may see these in the list of investors as UNDERWRITER X.
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SteveT
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Post by SteveT on Oct 26, 2016 10:29:51 GMT
Given that FS are already offering rates of 18% plus 1% CB for >£250k (Birkenhead), one has to wonder how much further they could go to entice underwriters. I doubt if underwriters get more than about 15%, because they don't hold the loans for the full term. However, I think some underwriters do hold the loans for the full term (same rate as normal lenders), you may see these in the list of investors as UNDERWRITER X. So who do you think buys underwriters' parts if they're not obliged to hold to term (other than selling via the SM like us mortals)?
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spyrogyra
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Post by spyrogyra on Oct 26, 2016 11:51:51 GMT
A major enticement could be if interest is deducted upfront. This has been discussed many times but it looks like the platform took the view that if interest payments are collected at redemption, they would be able to attract more borrowers. Now this is biting back. It will be very messy to change it now, though not impossible,especially on new loans. It's a totally different issue that dealing with the renewals and the old loans should be the priority for the foreseeable future. Time to scratch their heads and come up with some kind of a solution, otherwise the number of loans on the PM will increase every day.
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sqh
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Post by sqh on Oct 26, 2016 12:50:03 GMT
I doubt if underwriters get more than about 15%, because they don't hold the loans for the full term. However, I think some underwriters do hold the loans for the full term (same rate as normal lenders), you may see these in the list of investors as UNDERWRITER X. So who do you think buys underwriters' parts if they're not obliged to hold to term (other than selling via the SM like us mortals)? When a loan fails to fill, FS bring in an underwriter, so the borrower gets the funds when the loan is ready to drawdown. Lenders aren't aware of this, and keep filling the loan, albeit slowly. When the loan is filled it is given a backdated activation date. This is what happened with the Hull loan. So the answer to your question is ordinary lenders.
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SteveT
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Post by SteveT on Oct 26, 2016 13:01:28 GMT
Interesting. Are you certain of this (ie. that loans which have already been drawn down by a borrower can be left to continue to fill with lender funds)? If so, it would reduce the impact on borrowers of very slow-filling loans. However the "true P2P" nature of FS would surely require that post-drawdown parts purchased be novated from the underwriter to the lender, akin to operatbig a "hidden SM", and I don't really understand how accrued interest would then be handled.
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spyrogyra
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Post by spyrogyra on Oct 26, 2016 13:35:46 GMT
I think that was already done once, with the Newcastle loan,as far as I remember. It may have been done more than once. Interest starts accruing from the date of purchase as usual. Probably FS pays the underwriters' interest behind the scene (no criticism).
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mikes1531
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Post by mikes1531 on Oct 26, 2016 14:16:51 GMT
Interesting list spyrogyra . What happens to a loan if they can't manage to fund it completely? They use underwriting. If you look at the Hull loan you see that it was activated on 19th October, even though the loan didn't fill until last night. : Are you sure that activation dates are the same as drawdown dates? Think back to loans that were made in the spring. That was before FS started paying interest from the date of investment. Often, investors were reluctant to commit funds until they knew when they would start earning interest. So FS started declaring that interest would be paid from a specific date. Once that date had passed and a loan hadn't been completely funded yet, it became possible to earn interest from before the date of investment -- sometimes weeks before. (IIRC, on one loan my interest started accruing a full month before I invested.) Now to relate that to the question of activation dates... AFAIK -- and I don't claim to have checked every case -- when the loan finally was filled and officially activated, the activation date shown on the loan page was the date that FS had declared as the beginning of interest accrual. And that made sense to me at the time because, before that, the date of activation was the date interest started accruing, so it wouldn't have required a system software change to enable backdated interest accrual.
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mikes1531
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Post by mikes1531 on Oct 26, 2016 14:48:49 GMT
To illustrate the point of my previous posting, look at the Poole loan (2722039207).
16/May update: "This loan will pay interest from today, 16th May."
20/June update: "As soon as funds are received the loan will be completed - in the meantime interest continues to accrue."
This suggests to me that the loan still had not drawn down as of 20/Jun. And someone who invested on 20/Jun would have received interest starting five weeks before they invested.
The activation date shown for this loan is... 16/May.
I rest my case.
PS. At one point I noted that the 'Date Made Active' seemed to be the same as the 'Date Made Live' on recent loans, and wondered whether the activation date was now being set to the date of the first investment. The Hull loan disproves that, however, because I have a part of that loan showing 41 days of accrued interest, so I must have invested in mid-September.
PPS. These backdated activation dates cause other headaches for FS... The system calculates the 'Expected End Date' to be six months after the activation date. With a loan like Poole, that means the end date comes noticeably earlier than six months after drawdown. I don't know what end date FS actually have agreed with the borrower, but it wouldn't surprise me if it's six months after drawdown. This leads FS investors to believe a loan is overdue before it really is. And there's a knock-on effect for the calculation of the 'Effective Rate' that's displayed for parts on the SM. These don't strike me as particularly easy headaches to solve, but I have no experience in such matters.
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