Loan Renewals

That's simple to avoid. SS could offer the option for those people that want to renew the loan to do so as is done on other P2P sites so those lenders would neither lose out on a "good loan" or get allocated a smaller portion if SS allocated to them first and if everyone wanted to renew then the loan would be fully funded.

The issue is not that I expect a loan to run exactly to time, as I have already said I understand it is very rare if they do and a period of 2-3 months should be long enough for the legals to be taken care of. After all the date the loan should be repaid is not a surprise to anyone so I would expect SS to be in contact with the borrower before it is due to ensure it is repaid on time or near to it.

The issue is SS assume I want to keep extending the term on a loan indefinitely and given the situation of some SS loans and valuations I may not want to. If SS do not manage to fill the loan on the open market a second time (or as many times as they decide to extend) that must say something about the quality of the loan so why not let investors decide not SS or are they too worried the loans will not all get taken up.

Unlike you I do not have blind faith in SS ability and like to have some control over where and how long I loan to a particular borrower. I am happy to commit to the initial term and sell on the secondary market if I choose to but assuming I want to commit to another 12 months without giving the option to not renew is not reasonable. As you say perhaps SS is not for me as I like to choose where my money is used and not put it in the same loan indefinitely.

Do any of you have experience with loans on FS and how their "extensions" work, i.e. when they are not formally renewed?

I think the SS way is Simple and it Works. Keep it so please.

Do you know the loan "Land in Rishton" on FS as an example?

This has been touched on a recent FS thread too. In short, in my view, for investors the system on SS currently feels great and the system on FS currently feels overbearing and generates far too much supply for investor demand (as renewals compete in the same space as brand new loans). 

However, this SS perception IMO will very much not be the case when an SM liquidity problem hits again. Let's imagine a situation where just about every loan on the SS book has £100k+ available on the SM, with few takers. People become a bit grumpy that they can't sell their undesired loan parts (as they did for a month or so after Brexit when this basically happened). Then, SS come in as usual and say "PBLXX hasn't worked out as planned and we're giving them another 3 months". I then imagine we will have some very disgruntled investors who will riot about not being given the chance to exit in the terms they thought they were signing up to.

There's no panacea here, SS's system is only 'better' than the rest because of extraordinary SM liquidity. When that goes, and it will, it'll be broadly exactly the same as FC and FS in this respect i.e. you're stuck for the long haul. Except on SS, you could be stuck for the long haul on the rather more risky and unusual loans with questionable borrowers that they tend to specialise in. 


Edit: Which is why I keep diving in on threads to say that just because your loan part sold on the SS SM in 5 seconds, that doesn't mean it always will 

Absolutely agree with what you've said, and it's not my view that SS are doing anything wrong in this respect.

To answer your questions,  there are a few possible reasons why. Firstly, some lenders may be 'gaming' to an extent and overexposing themselves to loans trusting they can sell later. Second, some lenders, especially newer ones, may not be aware of the terms they're really signing up to - I wasn't really aware when I signed up. Third, there's quite a few instances where loans initially look fine but become undesired by many when new information comes to light (e.g. PBL064, gloucs loans).

I have no idea of the numbers in each category of course, but some of the threads on here and the SM availability patterns we see make these trends pretty clear. At the risk of sounding like a killjoy too often, it's probably worth banging the risks drum to help those newer lenders who've made the effort to find this forum aware of the dangers.

sandbrain:  I don't know for sure, but I'd guess Lendy would either cover the shortfall out of their working capital, or call in underwriters, or delay drawdown.  It's really not clear what's happening with PBL143, where the seller was reported to have served notice on 24/Aug for the borrower to complete the purchase on 24/Oct.  (The borrower probably spent most of that two months trying to arrange financing elsewhere before coming to SS at the last minute.)  Unless SS have simply failed to change the drawdown flag, this loan hasn't drawn down, so the sale didn't complete by the deadline.  We have to hope that there's been an arrangement with the seller to accept a slight delay rather than use the failure to complete as an excuse to pull out of the sale contract, as that would give SS a black eye and possibly a dent in their wallet as well.

ISTM that there's likely to be a big difference in rollover rates between PBL093/DFL008 and a loan that has a negative term with a borrower who can't -- or won't -- repay their loan.  Based on the DFL008 maximum allocation of £1350, I'd guess that somewhere around 90% of the PBL093 investors were rolled forward into DFL008.  If there was a similar proportion of SS investors in negative term loans who were willing to participate in an extension, then I expect that SS would be able to supply the funds from their own working capital to replace the 10% of investors opting not to extend until new people invested (or old people increased their investments).

However, I really don't think the investor rollover rate would be even remotely close to 90% for the extension of a negative term SS loan.  I'd guess -- and it's really only a guess -- that SS would be lucky to get a 25% rollover rate.  In that case, they'd need to have a much larger amount of working capital available to allow investors to exit, and that WC would be tied up for a considerable period, though it effectively would be earning 12%.

FS allow their investors to set a flag indicating whether they're willing to roll their investment forward if a borrower renews a loan.  And while investors can change that setting until the day of a renewal, this gives FS a very good idea of what their investors are thinking.  SS might be able to obtain similar info by putting a possible extension onto the Pipeline list and asking people to set their pre-fund amounts accordingly.  If they received enough pre-funding, then they could allow old investors who wished to exit to do so.  It might be an idea worth trying, though if the pre-funding amounts are as low as I expect they would be, SS wouldn't want to activate the rollover process, and the reluctance of their investors to support that loan would be obvious to all and sundry, which wouldn't help investor confidence in the platform.

As a bit of background info... Until recently, 70-80% of investors rolled over their investments when FS renewed a loan.  Investors basically had to renew in order to maintain their investments because FS imposed investing limits when loans were first listed and/or investment opportunities disappeared in a FFF frenzy when they appeared.  More recently, with lots of new loans to choose from, that rollover rate has dropped to something like 20-30% (except for very small jewellery loans).  People are turning off the renewal flag and waiting to see what happens when the follow-on loan appears, and then deciding whether to reinvest or not.  Renewals can take some considerable time to be fully funded, and the policy of paying interest on investments from the day they are made must be putting strain on FS's finances.  Adopting a similar policy at SS could subject the platform to similar strains.