stevio
Member of DD Central
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Post by stevio on Jul 19, 2017 9:38:44 GMT
@filipkaradaghi
This loan was of interest to me at 17%, but please tell me how can you justify:
- making changes half way through marketing the loan (your lenders may have had to liquidate assets elsewhere/pass up other opportunities in expectation of a 17% loan)
- a reduction of only 2% in LTV causing a 2% drop in the interest rate to 15% (should the LTV drop another 15% would lenders be paid no interest? Please dont tell me it was due to now fitting into the LTV bracket that then fits a lower risk category)
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Post by reeknralf on Jul 19, 2017 9:47:16 GMT
It's a rare event that I get motivated to complain, but this is beyond the pale. I've wasted time and energy assessing and understanding a loan, then I have lost time and interest by transferring funds onto the platform.
Even if I am still tempted at 15%, I wouldn't invest, as perhaps it will be downgraded to 13%. I will inevitably view future loans in the same light: why bother considering a loan when the interest rate is a movable feast to be changed at the whim of the borrower?
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Post by Deleted on Jul 19, 2017 10:34:05 GMT
Hi both,
I can understand that it is frustrating when a loan gets de-listed, especially as time and effort has been spent on assessing a loan and transferring funds.
It is the first time that we have done this (we have withdrawn a loan listing previously, without re-listing it), and did have little choice as the borrower requested a reduced loan amount. The alternative would be to delist the loan entirely.
Based on the borrower’s request, we re-assessed the loan and assigned it a higher risk rating and a lower rate, reflecting what we assessed to be a lower risk given the lower loan amount and LTV (reduced from 78.1% to 75% on a gross basis). The pricing is what we believe to be in line with the market and based on our credit policy. We did increase the borrower servicing fee to compensate for the lower arrangement fee due (subject to full finding and loan acceptance by the borrower) considering the additional efforts we had to spend on this loan.
Given the reactions and feedback, we might have to reconsider this approach going forward, keeping in mind that the only other option in a similar situation would be to withdraw the listing entirely.
Please let me know what your preferences would be in this situation.
Regards,
Filip
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stevio
Member of DD Central
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Post by stevio on Jul 19, 2017 10:49:36 GMT
A 2% reduction in a 17% loan is about a 12% reduction in the rate
Were as a 3% reduction in a 78% LTV loan is only about a 4% reduction in LTV
So the rate was reduced by about 3 times that of the LTV
A reduction in risk is normal to reduce the rate, but should be compensatory and fair. It was a big jump for very little reduction in risk
As much as you have adjusted the fees in compensation for the extra time you needed to spend on the loan, we get no such compensation for time and interest lost in reassessing a loan
Yes, relisting is preferred to delisting, but offer us a similar deal
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Post by reeknralf on Jul 19, 2017 10:52:49 GMT
I appreciate that borrowers can be fickle, and that this is part of lending. However, the platform is in a much better position to ascertain this risk than the lenders. We have absolutely no insight into how far legals have progressed, or what it will cost the borrower to withdraw at any given stage. Apparently not very far, and not very much in the case of this loan.
Because investors are not in a position to quantify the risk of a loan being cancelled, most platforms pay interest from the point funds are committed. In effect the platform spreads the risk of individual loans being cancelled across all loans. So instead of offering loans at x% from drawdown, you offer a lower rate from the point funds are invested.
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Post by Deleted on Jul 19, 2017 10:55:20 GMT
A 2% reduction in a 17% loan is about a 12% reduction in the rate Were as a 3% reduction in a 78% LTV loan is only about a 4% reduction in LTV So the rate was reduced by about 3 times that of the LTV A reduction in risk is normal to reduce the rate, but should be compensatory and fair. It was a big jump for very little reduction in risk As much as you have adjusted the fees in compensation for the extra time you needed to spend on the loan, we get no such compensation for time and interest lost in reassessing a loan Yes, relisting is preferred to delisting, but offer us a similar deal Fair point. Our initial servicing fee for the loan was very low (0.1% on an annual basis) and we will consider it better the next time, keeping in mind that a re-listing might occur. Thank you for the feedback. Regards, Filip
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Post by Deleted on Jul 19, 2017 11:14:30 GMT
I appreciate that borrowers can be fickle, and that this is part of lending. However, the platform is in a much better position to ascertain this risk than the lenders. We have absolutely no insight into how far legals have progressed, or what it will cost the borrower to withdraw at any given stage. Apparently not very far, and not very much in the case of this loan. Because investors are not in a position to quantify the risk of a loan being cancelled, most platforms pay interest from the point funds are committed. In effect the platform spreads the risk of individual loans being cancelled across all loans. So instead of offering loans at x% from drawdown, you offer a lower rate from the point funds are invested. Hi reeknralf. The legals for this loan have been ongoing for around a week and the borrower has paid for two valuation reports. We do have an Q&A section for each loan where lenders may ask any questions related to the loan or the borrower. We are unable to pay interest before draw down given our business model. If we would, we would effectively be a bank and in breach of our regulatory permissions. I understand that there are some complexities with our model (no-prefunding, no interest until a loan is complete, borrowers may at any time withdraw their listing etc.), but it is the according to Article 36H of the Regulated Activities Order and our regulatory permissions. We are doing our best to make this as clear as possible to avoid surprises or disappointments and do welcome suggestions on how to improve it. Regards, Filip
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Post by reeknralf on Jul 19, 2017 11:22:40 GMT
We are unable to pay interest before draw down given our business model. If we would, we would effectively be a bank and in breach of our regulatory permissions. I understand that there are some complexities with our model (no-prefunding, no interest until a loan is complete, borrowers may at any time withdraw their listing etc.), but it is the according to Article 36H of the Regulated Activities Order and our regulatory permissions. Do I understand correctly that you operating under a different regulatory regime to those platforms who pay pre-drawdown interest?
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Post by Deleted on Jul 19, 2017 11:27:36 GMT
We are unable to pay interest before draw down given our business model. If we would, we would effectively be a bank and in breach of our regulatory permissions. I understand that there are some complexities with our model (no-prefunding, no interest until a loan is complete, borrowers may at any time withdraw their listing etc.), but it is the according to Article 36H of the Regulated Activities Order and our regulatory permissions. Do I understand correctly that you operating under a different regulatory regime to those platforms who pay pre-drawdown interest? I cannot really comment on what permission(s) other platforms operate under, but our understanding is that we cannot use own funds to pay interest on any uninvested funds. Our regulatory permission is to "Operating an electronic system in relation to lending", as set out in Article 36H of the RAO. Regards, Filip
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Post by reeknralf on Jul 19, 2017 11:52:40 GMT
I'm reasonably confident, but happy to be corrected, that these are the same permissions as for other platforms. Given that for instance FS have full authorisation, and also pay pre-drawdown interest, it seems that it is possible.
Even if you prefer not to elucidate it publicly, I would hope that you understand why it is that your competitors are able to offer a more equitable service than you. Perhaps you could seek some clarification from the FCA?
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Post by Deleted on Jul 19, 2017 12:15:16 GMT
I'm reasonably confident, but happy to be corrected, that these are the same permissions as for other platforms. Given that for instance FS have full authorisation, and also pay pre-drawdown interest, it seems that it is possible. Even if you prefer not to elucidate it publicly, I would hope that you understand why it is that your competitors are able to offer a more equitable service than you. Perhaps you could seek some clarification from the FCA? Hi reeknralf. It may be possible, but not something that we considered when we applied for our relevant permissions. It would require a significant cost and time undertaking to change our business model and/or regulatory permission(s) and not something that we are prepared to do at this point of time. Our Terms and Conditions set out what lenders may expect when registering and investing on our lending platform.
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stevio
Member of DD Central
Posts: 2,065
Likes: 894
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Post by stevio on Aug 22, 2017 12:49:03 GMT
I'm reasonably confident, but happy to be corrected, that these are the same permissions as for other platforms. Given that for instance FS have full authorisation, and also pay pre-drawdown interest, it seems that it is possible. Even if you prefer not to elucidate it publicly, I would hope that you understand why it is that your competitors are able to offer a more equitable service than you. Perhaps you could seek some clarification from the FCA? Hi reeknralf. It may be possible, but not something that we considered when we applied for our relevant permissions. It would require a significant cost and time undertaking to change our business model and/or regulatory permission(s) and not something that we are prepared to do at this point of time. Our Terms and Conditions set out what lenders may expect when registering and investing on our lending platform. Another loan in pending - LI need to up their game and draw down loans in an appropriate time and not tie up lenders funds, personally I will consider this the norm for LI and invest bearing a long delay before drawdown
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Post by Deleted on Aug 22, 2017 13:11:43 GMT
Hi reeknralf. It may be possible, but not something that we considered when we applied for our relevant permissions. It would require a significant cost and time undertaking to change our business model and/or regulatory permission(s) and not something that we are prepared to do at this point of time. Our Terms and Conditions set out what lenders may expect when registering and investing on our lending platform. Another loan in pending - LI need to up their game and draw down loans in an appropriate time and not tie up lenders funds, personally I will consider this the norm for LI and invest bearing a long delay before drawdown Hi stevio. The borrower's solicitor was away on holiday last week and only back today - he knows that we and the borrower want to complete as soon as possible and hopefully we will be able to do so this week (subject to satisfactory searches and other). .
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Post by Deleted on Aug 25, 2017 16:06:00 GMT
Hi all. A loan update has been posted on the platform - we now expect the loan to complete the loan in the next week as we are awaiting the executed Deed of Priority prior to being able to complete. Hopefully, we will be able complete in the beginning of the next week as the borrowers are making arrangements to visit their solicitor to sign the Deed Tuesday 29 August.
Further update(s) will be made in due course.
Regards, Filip
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Post by Deleted on Aug 30, 2017 16:06:16 GMT
Hi all. The executed Security Documents (including the Deed of Priority) are currently being hand delivered to the solicitors acting on behalf of lenders. There is a very small chance that we will be able to complete today but most likely tomorrow morning/lunchtime.
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