Blink and you won't miss it

Hmm.

A couple more property loan requests just appeared, so now approaching £1.5M of property loan requests active by my reckoning.

I would suspect these are going to be difficult to fill. It's going to need higher rates to lure me to buy into these, especially if I already have earlier tranches.

I've made the decision to not participate in any further Funding Circle property loans due to the bad secondary market liquidity. There are far too many people currently stuck in these who seem anxious to flip them on, and they are far too slow to shift. I'm lucky if I can currently sell more than £40 per month of the ones I'm trapped in, and I'm concerned about Funding Circle acting as an underwriter on these loans. It increases platform risks and makes the liquidity problem potentially even worse.

I'm also concerned about the likely reaction of autobidders who will probably realise at the worse possible time on these loans that their money is effectively locked in. If this happens to enough of them at any one point in time,  and they collectively raise enough of a stink to get the Press interested, this has the potential to result in reputational damage to FC, which will affect us all.

I do wish they would slow these property loan listings down. I appreciate it's a growth market for them, but the failure of some of these auctions to fill should be raising a red flag warning to them. It shouldn't be acting as an incentive for the platform to start underwriting the darn things...

This is a real concern. When FC pretends it is joining with the lenders on these occasions it is disingenuous, because it has no interest in being a lender - cannot have - it is the platform operator buying up parts which the market finds unattractive, in the interests of the operator. You cannot offer, for example, a £2m funding and make parts of it, further into the development, conditional upon the whims of FC lenders. The underwriting by someone of the later tranches is part of the deal that the platform operator must make with the borrower. It's not the lenders' problem - plenty of other loans and platforms if you are not locked in.

The problem is in FC using the SM to dump parts that have not been first sold, as if it were a real lender in the same financial position as those who had bought to hold or trade. The failure to sell on the PM is not a matter of peaks and troughs in lender cash, it is poor deals (currently the 7% legacies) that are unattractive in the current market. If FC adopts a policy of ensuring that everything it offers to borrowers (on behalf of the real lenders) will be funded irrespective of the lenders' wishes and will be dumped through the SM on Autobidders and others, in possibly unfair competition with real lenders, then the SM could get even more sticky.

I agree Jimbo, about the dangers of Autobidders, and others, being locked in. The way I have handled this is firstly only to buy property loans which I am prepared to keep to term (and so perhaps should FC!). But also I have a certain sum that I will hold in the property loans and a certain maximum discount policy on the secondary market. If the money does not come back, then it does not get reinvested in new property loans. It now comes back very slowly. I am sure that others do this, and if FC try to get round the limitations of this route by dumping straight to the SM then they will just reduce the PM purchases of others.

The primary purpose of the SM is to provide liquidity to the 'buy and hold' lenders who will at some time need their money back. For the property loans the SM has been systematically used to shift loans through people who will trade, reducing the liquidity for those who buy through the SM. If the underwritten, poorer value, loans get also dumped there - currently only £50k in £20 loan parts bought but set to grow - then liquidity will worsen (currently acceptable IMO on non-property loans). Apart from the possible Autobidder panic exit which Jimbo mentions, and we are some distance from that because their property holdings will be small, there is also the regulatory aspect. Setting aside for example the question of FC possibly quietly dumping underwritten loan parts on the SM, there is also the fact that the existence of a liquid SM was the justification for not requiring a cooling off period under the distance selling regulations.

The continued liquidity of the SM is precious both to the lenders and to FC. They need to demonstrate that continued liquidity is not to be sacrificed for the sake of short term growth in lending volume.

I'm pretty sure there was a property loan with no cashback ... but I can't remember the details - sorry.

The only plan you need is one which involves passing up on the opportunity to dive into under-priced loans.

Thanks for the feedback. Having already invested in a few of the property loans, I'm wary about committing more to my portfolio immediately.

Because all the ones I bought have relatively short term, I'm prepared to hang on to them for the full term, although it's probably no surprise that I have got the entire lot up for sale. My philosophy has been that if they do sell, I can probably replace them with similar ones accompanied by a delicious fresh chunk of cashback.

I have found that mine do seem to be selling slowly but steadily at par on the SM, especially the older ones. Approx. 17% of my total property parts count is selling each week. If I excluded coastal resorts in Kent, the percentage would be higher.

I experimented with selling at a small discount, but no-one bought any of those!