averageguy
Member of DD Central
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Post by averageguy on Dec 5, 2016 22:22:25 GMT
Yes, that was my Amegedon. An event or series of events that causes all or most values of securities to drop below the value of the loan. You might say a bit like an average Joe finding himself in a negative equity situation. Why do we always say it needs to be a war or something so drastic, I don't think it does by any means. It certainly doesn't take a war or something similarly drastic. We've seen it happen before -- IIRC, property prices took a severe knock at the end of the 80's, and they've taken another knock after the 2007-08 financial crisis. A 70% LTV may sound like adequate security in such a case, but it isn't. Distress sales of property often result in a 20% discount to the 'market value', and if there's been a generally widespread drop of even 10% in market values, then the sale proceeds won't cover a 70% loan -- and that's before taking account of the costs of receivers, estate agents, lawyers, etc., etc. And while 'normal' residential property prices are reasonably consistent/predictable, the prices of commercial property and high-end residential properties are a lot more volatile and will suffer more than residential prices in a downturn. I was working in the commercial property debt recovery department of a well known bank during the fun of the late eighties early nineties and some loans of even 40/50 ltv were nowhere near sufficient security...just a whiff of that happening and I'd be off like a shot
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Post by thetreasurer on Dec 6, 2016 11:15:50 GMT
In some parts of the states in '08 you were lucky to get $0.2 out of the Dollar....
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seeingred
Member of DD Central
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Post by seeingred on Dec 7, 2016 14:53:27 GMT
You could always try China: 2500 to 3000 P2P companies and hardly any regulation? www.msn.com/en-gb/news/world/hundreds-of-nude-selfies-of-women-taken-as-collateral-for-chinese-loans/ar-AAlf4sN?www.ft.com/content/b908e8b8-6f72-11e6-a0c9-1365ce54b926Extracts from FT: China’s self-styled “Warren Buffett” and billionaire businessman Guo Guangchang on Wednesday called the country’s Rmb440bn ($65.9bn) peer-to-peer lending market “basically a scam”, becoming the latest high-profile executive to attack an industry that has been plagued by scandal. The sector has been lauded for providing an alternative to low-interest deposits but has more recently gained a reputation for hosting some of the biggest scams involving retail investor cash in China’s recent financial history, incurring the wrath of some of the country’s top business people as well as the regulators. China’s second-largest insurer, told the Financial Times that most P2P lenders were “fakes” and that the vast majority of China’s P2P lenders would not be able to continue their business in the future. Within the past year, ordinary Chinese people have fallen victim to scandals in which online financial platforms have disappeared with billions of dollars, provoking angry protests on the streets. |
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Post by dualinvestor on Dec 10, 2016 6:42:01 GMT
Credit crunches or downturns do not have to be caused by seismic events. Quite innocuous happenings sometimes combined can cause effects on the economy as a whole or small sectors. Financial shocks have been around as long as the financial sector.
On the matter of security most posters in this thread seem to ignore the point that whatever the general market is doing once enforcement action is taken the property is tainted and automatically faces a significant drop. Where the alleged LTV is 70% the actual will often start at 100% or more q.v. the Garden Centre loan was £1.7m to £2.3m 70% LTV, the administrators marketed it at £1.5m 113% LTV. The Somerset farm 101%.
Therefore although security on negative day loans may appear sound it might not be even without a general downturn caused by economic turmoil.
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