mikes1531
Member of DD Central
Posts: 6,453
Likes: 2,320
|
Post by mikes1531 on Oct 26, 2016 15:11:29 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. I'd answer "very badly" as well. How much an investor will put into a platform has to be influenced by whether they think the could liquidate some of their investment if they needed to. Suspending the SM would reduce investors willingness to invest. Wasn't one of the reasons people wanted the SM in the first place because they weren't willing to invest more until there was one? ISTM that what FS need to be doing now is to stop recruiting borrowers and pause bringing new loans to the market until the existing backlog is reduced. (The beauty of such an action is that they don't have to announce it to the world the way they would if they suspended the SM.) Especially since there is a significant amount of existing loans maturing at the moment. If some of those want renewing, FS won't find funding those to be easy, and the double interest accruing during the rollover period will be expensive. Example: £650k boat loan due 15/Oct. In the current environment, I'm afraid it would be a struggle for FS to fund a renewal if that's what the borrower would like to do, though FS should have a good idea what they'd be up against by looking at the percentage of existing investors who have set their 'Renew?' flag to Off. (I have.)
|
|
Neil_P2PBlog
P2P Blogger
Use @p2pblog to tag me :-)
Posts: 355 
Likes: 209
|
Post by Neil_P2PBlog on Oct 26, 2016 15:50:17 GMT
If they are getting each loan underwritten as has been suggested, with a small margin of profit, perhaps there is no need to slow down on new property loans and it is just a bonus if we fund it later.
At the same time it seems like investors are being overly cautious - the 28% LTV terraced property today I feel was very good at 12%. I was expecting it to go FFF, but judging by the list of people who invested after me only around 30 people bought into this loan.
|
|
spyrogyra
Member of DD Central
Posts: 386
Likes: 148
|
Post by spyrogyra on Oct 26, 2016 19:20:28 GMT
This is because the primary question nowadays is not the quality of the security but how would the platform perform in the coming months and how comfortable would someone feel being trapped into loans hard to exit at renewals.
|
|
r00lish67
Member of DD Central
Posts: 2,692
Likes: 4,048
|
Post by r00lish67 on Oct 27, 2016 3:19:01 GMT
This is because the primary question nowadays is not the quality of the security but how would the platform perform in the coming months and how comfortable would someone feel being trapped into loans hard to exit at renewals. I largely agree, although also side with Neil_P2PBlog in still snapping up particularly good value loans such as the terraced house. The more speculative 70%-ish nominal LTV and/or or commercial/unusual properties I'm steering well clear of as they require confidence in the platform that I don't quite have at the moment. That said, I'm really wrestling with myself as to whether I should continue to give any platform that trust (I'm looking at you, SS  )
|
|
r00lish67
Member of DD Central
Posts: 2,692
Likes: 4,048
|
Post by r00lish67 on Oct 27, 2016 3:58:38 GMT
I doubt whether the underlying quality of the loans is significantly different to SS (despite a couple of recent defaults)
We, as retail investors, need:
1) Pretty big-box blue sky pictures of properties, as opposed to 'loan ref id 666000666 Londonderry milking shed'
2) To be locked into high risk property loans without consent for renewal or extension, on the promise that:
3) There'll always be a really sexy arcade game-like secondary market that goes violently up and down in a rather hair-raising way depending on the whims of the market but generally looks really liquid, until it isn't.
Oh, and we really don't like:
a) Having to use XIRR calculations and calculate our current tax liabilities in order to assess whether a secondary market purchase is 'worth it'.
b) suddenly finding we can't sell a loan because its end date is a month away - positive 30 days? that's pretty much still a toddler elsewhere!
c) Grown-ups being offered 30% more interest for taking risks with significant amounts of capital (ok, maybe that's just me)
d) Oh, and receiving our interest at the end of a loan, because WE WANT IT NOW!
Hmmm, not quite sure what point I'm making here.
|
|
duck
Member of DD Central
Posts: 2,882
Likes: 6,974
|
Post by duck on Oct 27, 2016 6:12:47 GMT
I'm looking at this from a slightly different angle.
As of today I have 17% of my total invested tied up either in distressed loans or those that have hit their expected repayment date. This rises to 38% if you add in those loans that have passed the 30 day aftermarket sale embargo.
Certainly for me liquidity has been an issue this month. I've been successfully selling on the aftermarket (+10% return when the tax advantage is taken into account) so I have invested small amounts into new loans but what I am waiting for is a few decent repayments.
Unfortunately for FS this means that whilst I have been shipping in funds to other platforms my FS investment remains the same. OK I'm not a BH so I don't take advantage of the bonus offers but I doubt if I am the only one 'sitting tight' at present.
|
|
mikes1531
Member of DD Central
Posts: 6,453
Likes: 2,320
|
Post by mikes1531 on Oct 27, 2016 16:55:22 GMT
I had a far amount of parts bought from me on the SM today. The loans had 35-45 days remaining and were priced at a discount that was more than enough to cover the buyer's extra tax if they weren't a higher-rate taxpayer. If the buyer was a company or a non-taxpayer then the parts would have been even more attractive.
I don't know if this is indicative of anything, but it was encouraging to see a bit of activity in the SM. I can't help wondering what effect SS reducing their interest rates to investors will have on other platforms. I expect that FS will benefit.
|
|
spyrogyra
Member of DD Central
Posts: 386
Likes: 148
|
Post by spyrogyra on Oct 27, 2016 17:30:39 GMT
I don't see a lot coming from ordinary investors. But the underwriters are moving in. It looks like the primary market will be turned into a secondary market and the secondary into a residual or third-tier-tax playing, risk avoiding field competition. First loans will be filled by underwriters and stay on the primary market for months, and when filled, will show immediately on the secondary market at big discounts. For example, the Plymouth hotel. Only £9475 invested in the last 48 hours. But the loan is already underwritten and will stay on the primary market for quite a long TIME. And even if the speed of funding remains the same, it will need 70 days to fill ! Plus the days it is already on the market, it will be about 3 months! During these months the money will be tied. Who can tell what would be the state of play after 3 months? Certainly not so many were able to predict the current situation 3 months ago. Though there were a few cautious voices.
|
|
mikes1531
Member of DD Central
Posts: 6,453
Likes: 2,320
|
Post by mikes1531 on Oct 27, 2016 18:23:21 GMT
First loans will be filled by underwriters and stay on the primary market for months, and when filled, will show immediately on the secondary market at big discounts. : Who do you think will be selling those parts at a discount? It won't be the underwriters because they'll be bought out, presumably at par, as new investors come in. And it wouldn't make sense -- to me, anyway -- to invest in a loan shortly before it fills completely and then immediately sell out at a discount. I guess that leaves those who committed early, earned interest while the loan was still in the funding stage, and then need/want to get out. I wouldn't want to get into that position if I could avoid it, so I guess my strategy would be to invest only in loans that are close to being fully funded. But it could be rather awkward if that strategy were to be adopted by too many investors -- everybody would end up on the sidelines waiting for others to commit. Is that what's happening now?
|
|
SteveT
Member of DD Central
Posts: 6,875
Likes: 7,924
|
Post by SteveT on Oct 27, 2016 19:14:49 GMT
I don't see a lot coming from ordinary investors. But the underwriters are moving in. It looks like the primary market will be turned into a secondary market and the secondary into a residual or third-tier-tax playing, risk avoiding field competition. First loans will be filled by underwriters and stay on the primary market for months, and when filled, will show immediately on the secondary market at big discounts. For example, the Plymouth hotel. Only £9475 invested in the last 48 hours. But the loan is already underwritten and will stay on the primary market for quite a long TIME. And even if the speed of funding remains the same, it will need 70 days to fill ! Plus the days it is already on the market, it will be about 3 months! During these months the money will be tied. Who can tell what would be the state of play after 3 months? Certainly not so many were able to predict the current situation 3 months ago. Though there were a few cautious voices. Struggling to get my head around this a little. The borrower has already paid FS for 6 months' interest, yet none of this has yet reached those whose capital remains at risk whilst the original loan is slowly refilling. Yet the underwriters presumably have been paid a fee for guaranteeing to take up anything that doesn't fill (by when? another 30 days? 60? 90?). If it's now certain that the loan will be running for another 6 months, why have the original lenders not yet been repaid in full, along with their interest? [Edit: see explanatory response from FS below. The original loan was Completed in parallel]
|
|
|
|
Post by fundingsecure on Oct 27, 2016 22:02:58 GMT
SteveT,
just a quick note to correct - the point of using underwriting is that the original investors have been paid in full - both their capital and the interest.
FundingSecure
|
|
spyrogyra
Member of DD Central
Posts: 386
Likes: 148
|
Post by spyrogyra on Oct 27, 2016 23:23:47 GMT
Mike, you are right that it makes sense to sell at discount if you held parts for a bit longer. So the first sellers on the SM will be those who have committed earlier. There could be many reasons why lots of lenders are holding back at the moment. I expected a higher level of funding in the already underwritten loans, that's why I gave as an example the Plymouth loan. Some of the reasons for holding back are that lately quite a few big loans popped up on other platforms strongly preferred for interest being withheld upfront and better SM liquidity, the growing number of loans that renew, or linger or default. And the already expressed concerns about FS ability to handle efficiently so many property loans at the stages following the initial 6 months.
|
|
r00lish67
Member of DD Central
Posts: 2,692
Likes: 4,048
|
Post by r00lish67 on Oct 28, 2016 5:05:00 GMT
I had a far amount of parts bought from me on the SM today. The loans had 35-45 days remaining and were priced at a discount that was more than enough to cover the buyer's extra tax if they weren't a higher-rate taxpayer. If the buyer was a company or a non-taxpayer then the parts would have been even more attractive. I don't know if this is indicative of anything, but it was encouraging to see a bit of activity in the SM. I can't help wondering what effect SS reducing their interest rates to investors will have on other platforms. I expect that FS will benefit. That was probably partially me filling up my personal allowance. I keep finding loans with 60 days to go at 30% LTV with 12% interest and a 1% discount giving me an XIRR of circa 19%. I'm only human!
|
|
SteveT
Member of DD Central
Posts: 6,875
Likes: 7,924
|
Post by SteveT on Oct 28, 2016 5:46:14 GMT
SteveT, just a quick note to correct - the point of using underwriting is that the original investors have been paid in full - both their capital and the interest. FundingSecure Many thanks for explaining where I was going wrong. I should have looked up the original Plymouth hotel loan again (I don't hold it) and realised it had been Completed yesterday too. It does seem a helpful approach to unblocking a renewal log-jam, one I now hope may be applied at some stage to other loans where I'm waiting on a slow-filling renewal. Would it be worth adding another icon (a U perhaps) to Available loans that are already underwritten and therefore certain to run for the full 6 months?
|
|
mikes1531
Member of DD Central
Posts: 6,453
Likes: 2,320
|
Post by mikes1531 on Oct 28, 2016 14:23:05 GMT
Would it be worth adding another icon (a U perhaps) to Available loans that are already underwritten and therefore certain to run for the full 6 months? : An icon like that would be helpful, but it won't mean that the loan is "certain to run for the full 6 months". AIUI, it simply means the loan won't be cancelled for lack of funding. The borrower still has the option of repaying early.
|
|
)
