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Post by stevefindlay on Jan 19, 2017 10:02:22 GMT
Here is a separate thread for defaults and crystallised losses. A few things to note: - In almost every circumstance we will be unable to discuss the status of specific loans publicly on this forum. However, this is not an excuse to avoid providing you with information on your account: please contact us at invest@bondmason.com if you have a query with respect to an individual loan (please quote the loan reference in your email). Please do not post questions about specific loans on this thread as your question won't be answered here and you'll be invited to contact us by email.
- Also, this is not an excuse to avoid public disclosure of performance, for example please see our statistics page.
- We will aim to keep a more regular record of defaults and crystallised losses on this thread (as our statistics page is semi-annual). We estimate crystallised losses in the portfolio range of 0.5% to 2.0%
Loan definitions: - Repaid: the loan has fully repaid
- Live: the loan is repaying on time / in accordance with expectations
- Default: the loan has been defined as in default by the underlying platform (we aren't able to vary this definition, so we follow their definition directly)
- Crystallised loss: the loan has finished, and failed to repay the full amount
On your long loan list, the status of the underlying loan will be next to each of your positions. Coming soon will be a split on your Summary Dashboard too. Other definitions: - Default: the loan is in default (see above!).
- Loss given default: the expected loss for that loan - i.e. 100% means the entire loan is written off; 75% means 75% of the loan is written off etc
Our Approach to Defaults
We hate 'living dead' loans. It is much better to recover as much as possible as quickly as possible, even if this leads to a loss - rather than hope / pretend everything will be alright in the end, and lose everything. As a rule of thumb: - Property bridging and development loans: any extension of more than 90 days is a significant concern to us (the security should be seized at this point). If the developer wants more time than this, then they should refinance us out and arrange a new loan facility. - Invoice discount finance: anything more than 30 days over the later of the invoice date and the estimated payment date . Please note, for invoice discount finance, just because the loan has gone beyond the Estimate Repayment Date doesn't always mean it is in default. - Corporate loans: any late payments over 2 days. |
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Post by stevefindlay on Jan 19, 2017 10:08:34 GMT
Status as at 18 January 2017
- To date, we've had 19 go into default (of which 18 have been invoice discount finance), of these:
- 11 have had full recovery (because the majority of our loans are asset backed and/or insured we do expect to get a good level of recoveries)
- 2 have had 50% recovery (50% write off), totalling c.£900 written off
- 6 are still in recovery.
Of the 6 still in recovery:
- 1 we have significant concerns over
- 1 we think may lead to a partial write off and/or be slow to repay
- 4 are still early-ish in their process and we would like to see a good outcome.
The total value of all loans in default is less than 0.3% of the loans outstanding.
By volume, we have 800+ live loans, so less than 1% by volume in default (we take smaller positions in invoice discount finance loans on average as they can be bumpier).
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treeman
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Post by treeman on Jan 19, 2017 13:55:00 GMT
Mods/Admins - could this very useful thread be pinned ? Hoping / assuming stevefindlay will be adding updated info periodically? |
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registerme
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Post by registerme on Jan 19, 2017 14:17:50 GMT
Mods/Admins - could this very useful thread be pinned ? Hoping / assuming stevefindlay will be adding updated info periodically? It already is  .
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Post by stevefindlay on Jan 19, 2017 18:54:28 GMT
Hoping / assuming stevefindlay will be adding updated info periodically? Yes - that's the plan - as material developments occur and perhaps monthly-ish. Given the importance of this element of the performance.
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Post by stevefindlay on Jan 20, 2017 15:38:37 GMT
Across the platform 18 out of the 19 defaulted loans are invoice discount finance (out of 1,675+ overall). Whilst this isn't an unexpected proportion of the total, and 11 out of 18 have since fully repaid, we aim for BondMason to be at the more conservative end of the market and this doesn't sit comfortably with us. Therefore: - We are reducing our exposure to Invoice Discount finance across the platform
(to less than 20% by value) - We are reducing the maximum exposure any client has to a single piece of Invoice Discount finance (to 50% of their concentration setting) - i.e. max 1% for a "2% client"; and max 0.5% for a "1% client
"* - We have revised our loan acquisition criteria for those platform
s
*This change will be rolled out in the next week or so. |
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Post by stevefindlay on Jan 21, 2017 19:41:33 GMT
@new2p2p - good questions.
(1) What impact would it have had: a reduction of invoice discount finance and reduced size of this type of finance per client doesn't make too much change to the overall historical performance at the aggregated (BondMason) level. But it would have narrowed the variance of returns: the spread from worst performing client to best performing client.
(2) Looking ahead: we have a strong pipeline of speciality lenders in front of us, and don't have any plans to reduce the 7.0% target. Although we do expect rates (and returns) to reduce across P2P Lending in 2017.
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amphoria
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Post by amphoria on Mar 7, 2017 20:33:00 GMT
Across the platform 18 out of the 19 defaulted loans are invoice discount finance (out of 1,675+ overall). Whilst this isn't an unexpected proportion of the total, and 11 out of 18 have since fully repaid, we aim for BondMason to be at the more conservative end of the market and this doesn't sit comfortably with us. Therefore: - We are reducing our exposure to Invoice Discount finance across the platform
(to less than 20% by value) - We are reducing the maximum exposure any client has to a single piece of Invoice Discount finance (to 50% of their concentration setting) - i.e. max 1% for a "2% client"; and max 0.5% for a "1% client
"* - We have revised our loan acquisition criteria for those platform
s
*This change will be rolled out in the next week or so. This change does not appear to have been rolled out yet as today and last week I picked up individual invoice discount loans at my 1% setting, ie. not 0.5%.
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sb
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Post by sb on Mar 17, 2017 8:33:19 GMT
Status as at 18 January 2017- To date, we've had 19 go into default (of which 18 have been invoice discount finance), of these: - 11 have had full recovery (because the majority of our loans are asset backed and/or insured we do expect to get a good level of recoveries) - 2 have had 50% recovery (50% write off), totalling c.£900 written off - 6 are still in recovery. Of the 6 still in recovery: - 1 we have significant concerns over - 1 we think may lead to a partial write off and/or be slow to repay - 4 are still early-ish in their process and we would like to see a good outcome. The total value of all loans in default is less than 0.3% of the loans outstanding. By volume, we have 800+ live loans, so less than 1% by volume in default (we take smaller positions in invoice discount finance loans on average as they can be bumpier). I've crunched some numbers and get 5.2% annual expected loss for invoice discounting loans. That implies net return 2.3% after 1% fee and 5% loss with gross return 8.5% (taken from bondmason statistics page). I've made the following assumptions 500 invoice discounting loans matured so far (1600 loans made so far, 40% repaid, assuming most of them are invoice discounting loans as they are short term loans) 18 invoice discounting loans defaulted, which give default probability 3.6% 30% loss on default, which gives expected loss 1.1% (30% * 3.6%) 2.5 months - average duration of an invoice loan, which gives annualised expected loss 5.2% (12/2.5 * 1%) Am I correct?
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Post by stevefindlay on Mar 17, 2017 13:04:48 GMT
Status as at 18 January 2017- To date, we've had 19 go into default (of which 18 have been invoice discount finance), of these: - 11 have had full recovery (because the majority of our loans are asset backed and/or insured we do expect to get a good level of recoveries) - 2 have had 50% recovery (50% write off), totalling c.£900 written off - 6 are still in recovery. Of the 6 still in recovery: - 1 we have significant concerns over - 1 we think may lead to a partial write off and/or be slow to repay - 4 are still early-ish in their process and we would like to see a good outcome. The total value of all loans in default is less than 0.3% of the loans outstanding. By volume, we have 800+ live loans, so less than 1% by volume in default (we take smaller positions in invoice discount finance loans on average as they can be bumpier). I've crunched some numbers and get 5.2% annual expected loss for invoice discounting loans. That implies net return 2.3% after 1% fee and 5% loss with gross return 8.5% (taken from bondmason statistics page). I've made the following assumptions 500 invoice discounting loans matured so far (1600 loans made so far, 40% repaid, assuming most of them are invoice discounting loans as they are short term loans) 18 invoice discounting loans defaulted, which give default probability 3.6% 30% loss on default, which gives expected loss 1.1% (30% * 3.6%) 2.5 months - average duration of an invoice loan, which gives annualised expected loss 5.2% (12/2.5 * 1%) Am I correct? - your approach is sound (it is important to gross-up default rates for loans of length less than 1 year), but a couple of the inputs are out a little: - The gross rates on these loans tends to be much higher than the BondMason average (higher than 8.5%) - closer to 11-13%* (this is noted in the rates bar chart on the stats page) - average term is closer to 3 months - The loss on default we'd expect across the full 18 is a little lower - closer to ~20% This gives a net result of 11-13% less 2.9% = ~8-10% or ~7-9% after the 1% fee. *NB: since Nov 2016 we have had some exposure to some Invoice Finance at 6.5% but these have a provision fund against them (even though we don't normally like provision funds...). So are excluded in these calcs as any defaults wouldn't convert into losses in the same way as calculated above.
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sb
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Post by sb on Mar 17, 2017 15:01:48 GMT
I've crunched some numbers and get 5.2% annual expected loss for invoice discounting loans. That implies net return 2.3% after 1% fee and 5% loss with gross return 8.5% (taken from bondmason statistics page). I've made the following assumptions 500 invoice discounting loans matured so far (1600 loans made so far, 40% repaid, assuming most of them are invoice discounting loans as they are short term loans) 18 invoice discounting loans defaulted, which give default probability 3.6% 30% loss on default, which gives expected loss 1.1% (30% * 3.6%) 2.5 months - average duration of an invoice loan, which gives annualised expected loss 5.2% (12/2.5 * 1%) Am I correct? - your approach is sound (it is important to gross-up default rates for loans of length less than 1 year), but a couple of the inputs are out a little: - The gross rates on these loans tends to be much higher than the BondMason average (higher than 8.5%) - closer to 11-13%* (this is noted in the rates bar chart on the stats page) - average term is closer to 3 months - The loss on default we'd expect across the full 18 is a little lower - closer to ~20% This gives a net result of 11-13% less 2.9% = ~8-10% or ~7-9% after the 1% fee. *NB: since Nov 2016 we have had some exposure to some Invoice Finance at 6.5% but these have a provision fund against them (even though we don't normally like provision funds...). So are excluded in these calcs as any defaults wouldn't convert into losses in the same way as calculated above. Thank you for the explanation. I've based my estimation of gross return on my portfolio and the graph below. I have 7 invoice discounting loans in my portfolio, the average rate is 8.5%, four of them have 6% rate. Are they those loans with the provision fund? What is the meaning of the rate on this graph? Is this the net return?  As for a loss on the default number, it is difficult to really tell if it is 20% or 30%, the sample size is too small. Two loans with zero recovery can easily move it by 10%. It would be nice to have better idea what it is as it has a quite big impact on the expected loss and the net return.
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Post by dan1 on Mar 17, 2017 15:08:36 GMT
*NB: since Nov 2016 we have had some exposure to some Invoice Finance at 6.5% but these have a provision fund against them (even though we don't normally like provision funds...). Growth Street, perhaps?
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keystone
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Post by keystone on Mar 21, 2017 23:29:15 GMT
Loan reference 1532 "This is the fifth such loan with this debtor, whilst the other four fully repaid, the debtor then entered into difficulties, their company went into administration and has since been bought out of administration. We are yet to receive the administrators report which will set out the final position". Has there been any further progress on this default stevefindlay ? |
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Greenwood2
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Post by Greenwood2 on Mar 23, 2017 11:17:51 GMT
Some platforms spread any losses pro rata across all lenders, if BM could structure things this way it would remove the problem of lenders not wanting to invest 2% in any one loan, giving them possibly an individual 2% loss. If the losses across the platform are very small spreading this across all the lenders would be much more equitable than some lenders taking all the pain.
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davex
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Post by davex on Mar 23, 2017 15:03:48 GMT
Some platforms spread any losses pro rata across all lenders, if BM could structure things this way it would remove the problem of lenders not wanting to invest 2% in any one loan, giving them possibly an individual 2% loss. If the losses across the platform are very small spreading this across all the lenders would be much more equitable than some lenders taking all the pain. What a silly idea. Why on earth should i take any loss on a loan i am not involved in?
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