andy2001
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Post by andy2001 on May 28, 2014 15:27:50 GMT
Hi all, newbie here looking to lend more on AC. Apologies for the possible ignorance on property loans but what happens if the borrower defaults on this loan – do lenders get 1,75%/month & if so as from when until when realistically? I’ve heard that 2nd charges on a borrower’s own home are difficult to enforce, slightly put off by this. May have missed something but if the loan is to enable the borrower to start a new venture & cover him for a period until the £1.2m due to him comes in from a previous venture (ventures re which we have little/no info, have to take him on his word?)… 1. couldn’t he delay the new venture until the £1.2m (or part of it) comes in (which should be in the next couple of months presumably, he’s already waited 6 months plus however long it took him to weigh up his options, approach AC/others & get vetted for the initial loan..) 2. is it really credible you’d put your own house up for a sale taking a £750k hit on the market price in these circumstances (particularly if you’re a wealthy individual). Wouldn’t the use of some of yr other funds, an equity release or increase in the mortgage (or mixture of the above) be a cheaper way of doing things? If there is distress here what happens in the event of default becomes pretty important. Some lenders may be happy to take a punt for 1,75%/month but if this isn’t enforceable for a long period of time it would be helpful to know. Thanks & best wishes to all The original loan was for the reasons you stated. This is to refinance the first, as the house has not yet sold, and is being offered at a lower price, and the money due has not yet been arrived.
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j
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Post by j on May 28, 2014 16:11:12 GMT
Auction now fully funded & no underwriter in sight. WOW, £600k worth gone in about 24 hours!  |
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Post by Ton ⓉⓞⓃ on May 28, 2014 16:19:53 GMT
Auction now fully funded & no underwriter in sight. WOW, £600k worth gone in about 24 hours! As you intimate there's an amazing appetite for risk, but also as you say the individual seems reliable with assets, so are they paying a greater interest rate simply for anonymity and who they are? The rate on it's own makes it look risky, but I think it's more the emergency nature of the loan that's being paid for really.
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j
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Post by j on May 28, 2014 16:39:08 GMT
Auction now fully funded & no underwriter in sight. WOW, £600k worth gone in about 24 hours! As you intimate there's an amazing appetite for risk, but also as you say the individual seems reliable with assets, so are they paying a greater interest rate simply for anonymity and who they are? The rate on it's own makes it look risky, but I think it's more the emergency nature of the loan that's being paid for really. I think 2 factors for higher rate. One, as you said, is the emergency factor & two, is the lower ltv given the 20% reduction in the asking price for the property. Whilst things can & do go wrong, I think there's double protection on this one:the property selling & the £1.2m being received from their other project. If either get delayed again, they can simply extend the loan again. I don't see extension as a weakness, merely a practical temporary solution to delays in cash flow, as long as lenders are compensated fairly for it
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j
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Post by j on May 28, 2014 16:54:49 GMT
I have invested but only 20% of my normal size. It very much shows that the lending base on AC is very much obsessed with outright carry (yield), rather than the carry to risk ratio. TC was observed to be exactly the same until a slew of defaults hit home. The LTV number gives me no confidence ... its quite likely it turns out to be over 100%. I suspect this loan will be okay simply because the businessman will receive £1.2mm of cashflow at some point. However, there must be a high probability of it needing refinancing in three months. Agree in terms of further re-financing & the fact there is a perceived double layer of protection. Had the property ltv been the only protection, I doubt many would have invested, even at this rate. In fact, I doubt AC would have approved the loan in the first place.
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pikestaff
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Post by pikestaff on May 28, 2014 18:25:12 GMT
I have invested but only 20% of my normal size. It very much shows that the lending base on AC is very much obsessed with outright carry (yield), rather than the carry to risk ratio. TC was observed to be exactly the same until a slew of defaults hit home. The LTV number gives me no confidence ... its quite likely it turns out to be over 100%. I suspect this loan will be okay simply because the businessman will receive £1.2mm of cashflow at some point. However, there must be a high probability of it needing refinancing in three months. I agree. I was in the original loan but not tempted by this one.
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Post by bracknellboy on May 28, 2014 18:59:51 GMT
I have invested but only 20% of my normal size. It very much shows that the lending base on AC is very much obsessed with outright carry (yield), rather than the carry to risk ratio. TC was observed to be exactly the same until a slew of defaults hit home. The LTV number gives me no confidence ... its quite likely it turns out to be over 100%. I suspect this loan will be okay simply because the businessman will receive £1.2mm of cashflow at some point. However, there must be a high probability of it needing refinancing in three months. I agree. I was in the original loan but not tempted by this one. Interesting - and concerning - when two people's whose "nose" I have come to respect have come to that conclusion. I originally took the view "Thanks, I'll settle for having my current position bought out" but in the end decided to put money in, albeit significantly lower exposure than I had on the first loan. If I was to rationalise that, it was because I'm taking at face value that the reduction in marketing price has taken into account quick sale and previously received offers, and that there are probably means available to make up a small difference if required.
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Post by Ton ⓉⓞⓃ on Sept 12, 2014 13:09:49 GMT
I see we've now had the third loan on this created in My Loan Book.
Am I really getting 24%?
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j
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Post by j on Sept 12, 2014 13:32:45 GMT
I did invest in tranche 2 but was weary of the latest installment after yet another delay & sold my holding this am despite the very attractive rate. Good luck to those invested with 24%. As pepperpot said, let's hope the capital is repaid promptly. |
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pikestaff
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Post by pikestaff on Sept 12, 2014 14:49:11 GMT
I agree. I was in the original loan but not tempted by this one. Interesting - and concerning - when two people's whose "nose" I have come to respect have come to that conclusion. I originally took the view "Thanks, I'll settle for having my current position bought out" but in the end decided to put money in, albeit significantly lower exposure than I had on the first loan. If I was to rationalise that, it was because I'm taking at face value that the reduction in marketing price has taken into account quick sale and previously received offers, and that there are probably means available to make up a small difference if required. If it's any comfort I have been tempted back in now that it has defaulted. Slightly perverse perhaps, but I'm in the mood for playing a bit and I read the updates as encouraging.
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j
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Post by j on Sept 12, 2014 15:06:48 GMT
I did invest in tranche 2 but was weary of the latest installment after yet another delay & sold my holding this am despite the very attractive rate. Good luck to those invested with 24%. As pepperpot said, let's hope the capital is repaid promptly. In the same boat. Large exposure to Tranche 1, reduced for Tranche 2 and sold it all before we got to expiry. The default rate at 24% sure is attractive and as I remember there was a double layer of protection as the borrower had a lump of cash about to turn up to pay off the loan, so it wasn't totally dependent on the security. The issue for me was always the LTV @ 90%ish. Not only was it a high LTV but it was a second charge on a property in the 7% stamp duty band. No idea what is going on in Manchester but in some parts of SW London and Surrey those type of properties having been coming down in price for the past 12-months, despite the more general London housing "bubble". Good luck to those in SM. Has any bridge paid on time yet? I agree. The high ltv did put me off but more importantly is that the borrower reduced their price after tranche 1 quite significantly thinking it will surely produce a sale within 3 months. Whilst it eventually did, as per update, things can still go wrong & the cash injection is not mentioned anywhere as well! 24% is very meaty but too rich for me, imho. Good luck to those still in though, hope all works out well
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mikes1531
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Post by mikes1531 on Sept 12, 2014 15:22:53 GMT
Given that conveyancing periods are from 6-10 weeks, an offer for the house needs to be received within the next 6 weeks if the loan is to be repaid on time. Whats the betting there will be a third call, perhaps at 2 per cent per month, come September? This one could run and run. Full marks to chielamangus for his prediction of three months ago! There was some discussion of the borrower back in May, and a suggestion that they probably had plenty of assets but was borrowing here because those assets were illiquid. Looking at the Security for this loan, all that's mentioned is the second charge on the property. Which is to say that no Personal Guarantee has been given/taken. Does that mean that AC's sole source for repayment is from the sale of the property? Or could AC still pursue the borrower if the sale proceeds were insufficient, but just not as easily/effectively as if they/we had a PG?
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mikes1531
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Post by mikes1531 on Sept 12, 2014 16:08:33 GMT
IIRC, there had been a big chunk of this loan for sale on the Aftermarket until the reorganisation/extension today. No doubt any AI mandates in effect for the loan were turned off by the reorganisation. Has anyone seen any units of the extended loan extension on the AM? I expect 24% is enough that many of the lenders previously trying to sell will re-think their position and decide to hold onto their units, but there must be some who still will want to get out.
Perhaps it's too early to see any new units offered, or perhaps enough lenders willing to invest more in this loan have activated AI mandates that gobble up any units offered before anyone else notices that they are for sale.
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j
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Post by j on Sept 12, 2014 16:20:48 GMT
IIRC, there had been a big chunk of this loan for sale on the Aftermarket until the reorganisation/extension today. No doubt any AI mandates in effect for the loan were turned off by the reorganisation. Has anyone seen any units of the extended loan extension on the AM? I expect 24% is enough that many of the lenders previously trying to sell will re-think their position and decide to hold onto their units, but there must be some who still will want to get out. Perhaps it's too early to see any new units offered, or perhaps enough lenders willing to invest more in this loan have activated AI mandates that gobble up any units offered before anyone else notices that they are for sale. There were around £55k's worth just before restructure. Haven't seen any on AM since but, also don't have AI set up to know if some have been put on & simply vanished via AI. I would guess many current holders who had put on AM have now decided to hold on due to the higher rate.
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star dust
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Post by star dust on Sept 12, 2014 16:22:56 GMT
I have been blowing in the wind on this one. I had been slow re-selling and was feeling quite pleased that I had managed to get rid of about half my holding (a lot of which I had 'painfully' purchased in £20s), yesterday. Then the update appeared last night and checking out that it definitely seemed to be uner offer and off the market, I bought a couple of the discounted units! My holding is reduced, but not by that much. Unfortunately, AC have lumped all my loan parts into £100 units so no small ones left now I hope their magic system really is introduced soon. I am also unclear whether they can be traded, someone has asked in a Q&A but not been answered, and there are contradictory opinions on the tradability of these defaulted bridges on another thread. I would have felt more comfortable if AC had confirmed the exchange had taken place beforehand, but as they hadn't I'll Just have to hope for the best.
In edit: if AC had left me with any of the smaller units I'd have a go at selling, but I'll wait and see for the others. You can reactivate AI though, don't know if that indicates anything in particular. I don't hold any of the other bridges, but haven't seen any parts come back on the market since they were converted to 'new' loans.
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