ptr120
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Post by ptr120 on Sept 6, 2018 21:41:25 GMT
More than three weeks in arrears, and not a thing from MoneyThing SophieThing on the reasons for the arrears and the discussions with the borrower on bringing the line back in to line. Have they even had any discussions with the borrower, or visited to check if the properties are still occupied?
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copacetic
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Post by copacetic on Sept 6, 2018 22:33:00 GMT
I can think of 2 reasons why the borrower would stop paying interest on this:
1. The tenants are no longer paying them rent for whatever reason and the borrower can't afford to pay the interest (or they've spent rent on something else!?) 2. There's a hitch with the compulsory purchase order and the borrower no longer cares because they don't think there is enough equity and have written the project off
Obviously as I'm invested I'm hoping that it's the first and the rolled up interest would eventually be paid given the >£1m purchase price agreed. It's a pity the borrower won't just admit to what is going on rather than playing silly buggers though. I've always found in business that it's best to give a straight answer than dancing around the issue. Bad news with realistic expectations delivered up front rather than mushroom policy always earns a +1 in my book.
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sapphire
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Post by sapphire on Sept 7, 2018 5:23:30 GMT
More than three weeks in arrears, and not a thing from MoneyThing SophieThing on the reasons for the arrears and the discussions with the borrower on bringing the line back in to line. Have they even had any discussions with the borrower, or visited to check if the properties are still occupied? Indeed the lack of any response from MoneyThing over the past 3 weeks (despite a number of polite follow-ups) to a number of vital and relevant questions raised in various posts, is very disappointing. There have been a number of posts made by MT on other threads over this period, so 'being away on holiday' does not appear to be the reason. Even a quick update that this was being looked into and a response was forthcoming would have been helpful. I was planning to invest a significant sum in this loan, based on an informed decision following an understanding of the facts, rather than on speculation, and had transferred a significant sum to the platform, in readiness, as soon as MT provided a clarification. MT clearly does not seem to be interested in providing info relevant to potential buyers on the SM (and so also correspondingly assist sellers and potential sellers on the SM). Following MT's lack of response, I have moved my funds to a different platform to avoid cash drag. No prizes for guessing correctly how this experience will influence my future decisions to invest via MT.
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Post by Butch Cassidy on Sept 7, 2018 7:22:01 GMT
I can think of 2 reasons why the borrower would stop paying interest on this:
1. The tenants are no longer paying them rent for whatever reason and the borrower can't afford to pay the interest (or they've spent rent on something else!?) 2. There's a hitch with the compulsory purchase order and the borrower no longer cares because they don't think there is enough equity and have written the project off
Obviously as I'm invested I'm hoping that it's the first and the rolled up interest would eventually be paid given the >£1m purchase price agreed. It's a pity the borrower won't just admit to what is going on rather than playing silly buggers though. I've always found in business that it's best to give a straight answer than dancing around the issue. Bad news with realistic expectations delivered up front rather than mushroom policy always earns a +1 in my book. They may just have decided (whether in consultation with MT or not) that they will roll up the remaining interest & pay it off as a lump sum out of the final settlement that appears imminent. As the settlement appears to be sufficient & gold plated via Transport for London, I am prepared to accept that as reasonable; MT could always have helped by better communication to soothe the more nervous investors but I still believe this will have a happy ending & those doubters will be fully repaid.
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oik
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Post by oik on Sept 7, 2018 10:34:42 GMT
I confess to feeling a bit smug about my investment in the first tranche of a certain Bolton loan at Collateral: first in line with £3.5m of subsequent lower ranking loans all sitting behind it. Then something that wasn't in my calculations popped up...
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cwah
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Post by cwah on Sept 7, 2018 10:48:18 GMT
I can think of 2 reasons why the borrower would stop paying interest on this:
1. The tenants are no longer paying them rent for whatever reason and the borrower can't afford to pay the interest (or they've spent rent on something else!?) 2. There's a hitch with the compulsory purchase order and the borrower no longer cares because they don't think there is enough equity and have written the project off
Obviously as I'm invested I'm hoping that it's the first and the rolled up interest would eventually be paid given the >£1m purchase price agreed. It's a pity the borrower won't just admit to what is going on rather than playing silly buggers though. I've always found in business that it's best to give a straight answer than dancing around the issue. Bad news with realistic expectations delivered up front rather than mushroom policy always earns a +1 in my book. They may just have decided (whether in consultation with MT or not) that they will roll up the remaining interest & pay it off as a lump sum out of the final settlement that appears imminent. As the settlement appears to be sufficient & gold plated via Transport for London, I am prepared to accept that as reasonable; MT could always have helped by better communication to soothe the more nervous investors but I still believe this will have a happy ending & those doubters will be fully repaid. What if TFL takes years to complete the purchase? The loan will default, legal fees will add up and your money will be stuck for long long time. Fee may add up so much you'll be at lost. And if for whatever reason TFL decide not to purchase or purchase at reduced price, there will be no other buyer to compete with. How do you know it will end up fine?
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Post by Butch Cassidy on Sept 7, 2018 11:08:44 GMT
They may just have decided (whether in consultation with MT or not) that they will roll up the remaining interest & pay it off as a lump sum out of the final settlement that appears imminent. As the settlement appears to be sufficient & gold plated via Transport for London, I am prepared to accept that as reasonable; MT could always have helped by better communication to soothe the more nervous investors but I still believe this will have a happy ending & those doubters will be fully repaid. What if TFL takes years to complete the purchase? The loan will default, legal fees will add up and your money will be stuck for long long time. Fee may add up so much you'll be at lost. And if for whatever reason TFL decide not to purchase or purchase at reduced price, there will be no other buyer to compete with. How do you know it will end up fine? Latest Update: "Legals are still progressing with respect to the sale to TfL. Whilst we have been asked not to disclose the agreed price at this stage, we can confirm that it is in excess of £1m (against £645k loan + a few months accrued interest). We will let lenders know as soon as we get a date as to when the sale is expected to complete."
P2P lending involves risk & if this is loan proves too high for your taste you can use the SM; if you don't believe MT or think the final legals will take years or the world will end next week then put your stake up for sale - there are clearly plenty of takers with £50k+ selling in the last few days. No problem with risk averse lenders getting out via SM at present, then you will not need to worry if it all ends in catastrophy or not.
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cwah
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Post by cwah on Sept 9, 2018 2:46:24 GMT
I'm just trying to understand how this loan can be called safest when we've seen loans around 40% LTV resulting in a 100% capital loss (Birkenhead tranche B)
Just a little calculation: Loan value: £645k CPO: > £1000k (1010k?)
Let's assume it default: CPO: £1010k? Minus Loan value: £645k Minus recovery cost (legal, adminstration, agent, etc.): £379k+ - assumption based on the cost of Birkenhead which was about 6 months. It may be higher if it takes longer with tfl.
Potential net proceed to investor: - £14k
And it's very unlikely anyone will want to buy a building under an CPO with cost already defined by TFL. So it can't be sold on open market
One potential scenario is that the borrower already know that with all the legal and administrative costs AND combined with the timing from TFL (up to 2020) he'll not get any money at all.
So he decided to stop paying interest now to limit the losses!
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hazellend
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Post by hazellend on Sept 9, 2018 6:12:47 GMT
I'm just trying to understand how this loan can be called safest when we've seen loans around 40% LTV resulting in a 100% capital loss (Birkenhead tranche B) Just a little calculation: Loan value: £645k CPO: > £1000k (1010k?) Let's assume it default: CPO: £1010k? Minus Loan value: £645k Minus recovery cost (legal, adminstration, agent, etc.): £379k+ - assumption based on the cost of Birkenhead which was about 6 months. It may be higher if it takes longer with tfl. Potential net proceed to investor: - £14k And it's very unlikely anyone will want to buy a building under an CPO with cost already defined by TFL. So it can't be sold on open market One potential scenario is that the borrower already know that with all the legal and administrative costs AND combined with the timing from TFL (up to 2020) he'll not get any money at all. So he decided to stop paying interest now to limit the losses! I doubt it. Of course somebody would buy at discount with a CPO. It’s guaranteed profit.
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johni
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Post by johni on Sept 9, 2018 9:12:15 GMT
I'm just trying to understand how this loan can be called safest when we've seen loans around 40% LTV resulting in a 100% capital loss (Birkenhead tranche B)
Just a little calculation: Loan value: £645k CPO: > £1000k (1010k?) Let's assume it default: CPO: £1010k? Minus Loan value: £645k Minus recovery cost (legal, adminstration, agent, etc.): £379k+ - assumption based on the cost of Birkenhead which was about 6 months. It may be higher if it takes longer with tfl. Potential net proceed to investor: - £14k And it's very unlikely anyone will want to buy a building under an CPO with cost already defined by TFL. So it can't be sold on open market One potential scenario is that the borrower already know that with all the legal and administrative costs AND combined with the timing from TFL (up to 2020) he'll not get any money at all. So he decided to stop paying interest now to limit the losses! It was 69% LTV on tranche B not 40% There would be alot less work for an administrator as this building is a going concern. The Birkenhead administrators had to find the state of the work done, find the costs to complete. Market to a limited audience. The price for the CPO is at least £1m but by not paying interest it will go to default at some point. Then the borrower has potential to lose alot of money by not sorting this out.. I believe they will not want this as the administrators costs are their money.
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cwah
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Post by cwah on Sept 9, 2018 10:24:22 GMT
Yes true for Birkenhead. It was tranche A at 40% and tranche B at 69%.
My point is, could it be possible that the borrower would be better off defaulting?
Let's reconsider the same scenario in which the borrower wants to pay all in full: CPO: £1010k?
Minus Loan: £645k Minus interest payment (at 15% assuming MT takes some margin): £100k/year. so £300k if it completes in 3 years time. Minus all associated sales fees (legal, administration, etc): £100k? Minus capital gain tax: He got the property more than 20 years ago when he split the flats and sold each for 3 times less than the current value (100-200k each). Assuming he bought the building for £400k, it makes it a £600k Capital gain. At 20% capital gain tax it is £120k
Net proceeds in this hypothetical scenario: - £155k
Could the borrower seen a much lower CPO offer (ie. £1010k) than expected. Then considered all the alternative scenarios including fire sales, and concluded he would be much better off defaulting?
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keystone
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Post by keystone on Sept 9, 2018 10:33:37 GMT
I'm just trying to understand how this loan can be called safest when we've seen loans around 40% LTV resulting in a 100% capital loss (Birkenhead tranche B)
It was 69% LTV on tranche B not 40% Yes true for Birkenhead. It was tranche A at 40% and tranche B at 69%. Wrong again!, Tranche A was 46% not 40%.
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cwah
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Post by cwah on Sept 9, 2018 11:16:01 GMT
It was 69% LTV on tranche B not 40% Yes true for Birkenhead. It was tranche A at 40% and tranche B at 69%. Wrong again!, Tranche A was 46% not 40%. The exact number doesn't matter much. It was just an illustration. What really matters here is if the loan will recover the capital and interest due if default was to happen. To be honest, a £1m cpo doesn't sound like a guaranteed return if default were to happen. An open market sale will have offer significantly lower than the CPO that's why I said it's out of the table.
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johni
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Post by johni on Sept 9, 2018 11:37:04 GMT
Wrong again!, Tranche A was 46% not 40%. The exact number doesn't matter much. It was just an illustration. What really matters here is if the loan will recover the capital and interest due if default was to happen. To be honest, a £1m cpo doesn't sound like a guaranteed return if default were to happen. An open market sale will have offer significantly lower than the CPO that's why I said it's out of the table. But why would MT need to sell keep until CPO comes through all interest and capital is covered. Buyer is still responsible for CGT so he is no better off but in this case he no longer can negotiate with tfl so could end up alot worse off as MT only needs to cover our costs and nothing else
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cwah
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Post by cwah on Sept 9, 2018 11:56:20 GMT
The exact number doesn't matter much. It was just an illustration. What really matters here is if the loan will recover the capital and interest due if default was to happen. To be honest, a £1m cpo doesn't sound like a guaranteed return if default were to happen. An open market sale will have offer significantly lower than the CPO that's why I said it's out of the table. But why would MT need to sell keep until CPO comes through all interest and capital is covered. Buyer is still responsible for CGT so he is no better off but in this case he no longer can negotiate with tfl so could end up alot worse off as MT only needs to cover our costs and nothing else That's exactly my point mentioned earlier. The property can't be sold on open market as this will result in a bigger loss. From the borrower point of view, when including CGT + £8k/month interest to pay, he may end up loosing money when the CPO complete in X years time. He may actually save money by not paying interest at all and let it default. It's a completely hypothetical scenario and probably very far from the reality. But it just illustrate that with £1m CPO there is a (significant?) risk to loose money.
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