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Post by GSV3MIaC on Jul 10, 2017 14:24:26 GMT
Well it would appear to me, dumb as I am, that paying cashback on new tranches of the DFLs is not going to encourage folks to buy the old tranches on the SM .. or did I miss something?
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moogman
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Post by moogman on Jul 10, 2017 14:32:51 GMT
Current SM is at £6,841,332.99 - It will be interesting if this affects liquidity positively (and if so, by how much). + the defaulted loans = 7m. It has literally flatlined at that point since the beginning of the month Still not moving (may be some churn), but I guess we have to wait to see what this news does when everyone gets home and digests it Ah yes, how could I forget those neatly tucked away in a separate drawer! One wonders if these "bonuses" will be enough to stem the flow of sold loan cash and interest cash from leaving the platform (Apologies, I think you were tracking this on a month-by-month basis but I couldn't find the/a post).
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mary
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Post by mary on Jul 10, 2017 15:34:36 GMT
I assume that that this means that any loan that goes > -30 days must be in default, as interest is then overdue, and that this will cause a large spike in the Default tab, and that trading is suspended until the borrower pays the interest to make the loan current again?
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Post by GSV3MIaC on Jul 10, 2017 15:42:20 GMT
(in reply to mary:)
Well it's a good question, but I think you are leaping to a conclusion which isn't there. The key weasel-words are "to the extent that the loan is deemed to be in default" .. whether 30 days overdue is enough, on its own, to trigger a default is not clear .. if the security looks solid enough to (eventually) cover the interest I can see some loans being allowed to run on 'IA' (Interest Accruing) for a lot more than 30 days (not unlike now, where they can get to 180 days before being defaulted).
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GeorgeT
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Post by GeorgeT on Jul 10, 2017 15:42:45 GMT
Maybe I need to go to Spec Savers but is there any mention of the Provision Fund and if not as to where any residual PV monies are being re-deployed? I've just got back from SpecSavers (literally!) and have just read the important update email. I'm still digesting it but my first thoughts: 1. Measures announced will have little to no effect on the SM and people's willingness to invest more on LY 2. Cashback offer on DFL tranches doesn't make sense. There's a massive difference between 1/12th of my total holding in a loan and 1 month's extra interest (1% on a 12% loan). Tale a DFL where I have £4k invested. One twelfth of my investment in the loan would be £333. Very nice. One month's extra interest per annum (at 12%) would be £40. Which is it? It makes a massive difference!
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nick
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Post by nick on Jul 10, 2017 15:56:46 GMT
(in reply to mary:) Well it's a good question, but I think you are leaping to a conclusion which isn't there. The key weasel-words are "to the extent that the loan is deemed to be in default" .. whether 30 days overdue is enough, on its own, to trigger a default is not clear .. if the security looks solid enough to (eventually) cover the interest I can see some loans being allowed to run on 'IA' (Interest Accruing) for a lot more than 30 days (not unlike now, where they can get to 180 days before being defaulted). I'm fairly sure it only applies to loans that fall within their current definition of default, ie after the 180 day tolerance period. This would be consistent with their commentary that the change is unlikely to have much practical effect given that SM volumes of such loans has been historically very low at around 1% of SM volume.
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Post by loftankerman on Jul 10, 2017 15:57:03 GMT
ISTM that with SBL gone, there will be even less encouragement for Lendy to avoid smoke and mirrors dealings with flakier borrowers and valuations, with the onus being on lenders whom they smugly recommend should have '... appropriate risk management processes such as proper diversification (that) should help reduce overall risks.' Notably they left out crystal balls and second sight.
Frequent significant policy swings and process changes are a sign of panic not impressive management. At least this revision has resolved my musing on whether or not to put any more money into a couple of pipeline items going live tomorrow.
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dovap
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Post by dovap on Jul 10, 2017 15:57:38 GMT
can't see owt positive about from the latest missive
Nice to be reminded that Lendy still scooping up interest from loans on the sm though
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Post by lendinglawyer on Jul 10, 2017 15:58:21 GMT
On first read I assumed it meant interest on DFL tranches with CB effectively accrues at 1.0833333% per month rather than 1% per month, albeit the additional 0.0833333% will be structured as tax-free CB rather than taxable interest income. And that this only applies to the tranches with CB, so old tranches continue to accrue at the normal 1% per month. But I do agree it is ambiguous... I also 100% agree with GeorgeT these changes won't help the SM, except maybe it will make people buy up "good" looking loans with negative days as a bit of a punt on the bonus. But then you potentially get stuck as and when it hits DEF status. So it is a proper game of Russian Roulette... I don't like these changes. There is no substitute for simply resolving a few of the DEFs and other negative days loans, in particular some of the larger ones, and the DFLs as and when they approach maturity. All in all, I'm glad I'm only £6k from the front of selling my last loan part, DFL012, although I will continue to watch from the sidelines for signs of improvement which might tempt me back. |
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registerme
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Post by registerme on Jul 10, 2017 15:58:41 GMT
Leave aside the obvious confusion over 1% or 8.3% and I actually think that some of the changes are positive. However, I also can't help but think that they are trying to fix the wrong problem the wrong way.
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elsee
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Post by elsee on Jul 10, 2017 16:04:20 GMT
First signs of changes. default loans/Live loans gained an extra column, Bonus Accrual ranging from 3% to 6% for defaults, up to 2.5% for live. I just noticed that! I actually started a new thread which I have since deleted having found this thread.
And you can now sort by days remaining!!!!
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nick
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Post by nick on Jul 10, 2017 16:04:40 GMT
Well it would appear to me, dumb as I am, that paying cashback on new tranches of the DFLs is not going to encourage folks to buy the old tranches on the SM .. or did I miss something? It's worse than that, it actively encourages existing DFL holders to switch out of existing issued loans into new qualifying loans as they list - the supply of SM DFLs is likely to increase and queues will lengthen all other things being equal. I guess the focus has been on getting latter tranches funded to avoid defaults arising from lack of funding as developments progress........
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twoheads
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Post by twoheads on Jul 10, 2017 16:09:33 GMT
Okay, I've read the e-mail and at least understand the bonus scheme now.
I don't think Lendy have explained it very clearly so I'll try:
Put simply: Loans over term accrue a bonus at half the headline interest rate and the entire bonus accrued during the overdue period is paid at redemption time to whomever owns the loan part at the time. The regular interest is accrued by the various owner(s) of the loan part throughout its lifespan as before.
This explains the current bonus figures. For example: a 12% loan which is 4 months overdue has a bonus of 2% meaning that it will pay a bonus of 2% of the loan part value at redemption. Thus, for a 12% loan, the accrued bonus goes up by 0.5% per month.
I believe Lendy have done things this way to minimise the changes to their internal systems. Showing the bonus is a simple calculation based on overdue term and underlying %PA. Nothing actually changes for any loan part and it's lifetime of interest payments. All is as before until redemption. The only change is when an over term loan is repaid - a bonus is added. Paying the bonus is a simple tweak to the handling of loan repayment.
That's how I see it.
Oh yes, and...
I don't think lendy will change it's default policy. I think the SBL category will disappear and be merged with the existing IA category (IA will be then be for loans with -1 to -180 days remaining). This is because they have stated that they will stop paying interest when the term goes negative.
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Steerpike
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Post by Steerpike on Jul 10, 2017 16:10:33 GMT
Nobody really thinks that the cashback is 1/12 of their investment do they?
Obviously a typo and meant to be 1/12 of the annual interest.
I wondered if the (re)statement about there being no interest on loans for sale was an indication that there really will be no interest on loans for sale even if the sale is cancelled before pay day? If so, this might have a significant impact on the SM.
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jonah
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Post by jonah on Jul 10, 2017 16:50:47 GMT
Put simply: Loans over term accrue a bonus at half the headline interest rate and the entire bonus accrued during the overdue period is paid at redemption time to whomever owns the loan part at the time. The regular interest is accrued by the various owner(s) of the loan part throughout its lifespan as before.
This explains the current bonus figures. For example: a 12% loan which is 4 months overdue has a bonus of 2% meaning that it will pay a bonus of 2% of the loan part value at redemption. Thus, for a 12% loan, the accrued bonus goes up by 0.5% per month.
So in the example above, if you hold a 12% loan past the point where it gets 'bonus' interest, you are effectively getting 12% + 6% PA interest, i.e. 18% PA. Assuming that the loan actually pays out and covers all the capital and interest, that seems to be a radical improvement on getting 12%. If there was a 'rock solid' 12% loan which you were very happy with and happy to hold until redemption, surely getting 18% PA would be a nice return? Whilst I agree this won't help with loans which people have concerns over, this should surely clean out the 'better' loans from the SM?
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