adrian77
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Post by adrian77 on Oct 14, 2018 14:00:19 GMT
I agree with your post but would say the above question refers as to why so many FS developers have difficulty in getting reasonable loans - personally I can easily get a loan at about 4% but don't want one as it would take a huge chunk out of my profit (yes I know it can be offset againt tax but I like to sleep at night)
There are 5 things that worry me about FS and their high reliance on property loans
1) I am not convinced they have the business expertise to act in this field - to date the track record of their property loans is not very impressive and some of the valuations, especially residual ones strike me as a joke e.g. FS seemed to be the last of us to be worried by the loan in Cumbria
2) The number of defaulted loans is far too high. I have about 30% of overdue loans and most are property with e.g. Formby being 14 months late
3) The recovery of said loans is far too low - we have already had 2 x 100% property loan losses and it won't stop there. NI turbine, Whitehave,Wimbledon etc have been spectactular losses.
4) The recovery times are far too long - as a born-again slaphead I fully expected all loans to be dealt with inside 12 months and not have loans over 2 years late e.g. South Wales hotel is over 32 months overdue
this is my logic so please feel free to criticise it :
If we take my loan book as an example with £6K in it and 1/3 defaults and is not paid over 2 years we have
£4K loans at 12.5% over 2 years = £1K interest
£2K loans at 50% recovery over 2 years = £1K loss
so that is 0% return over 2 years ...as I see it!
If we repeat the above but over one year then it is not pretty with interest of £500 and £1K capital loss giving a loss of £500 or (500/6000) x 100 = minus 8%
True the figures gets better after 3 years but I may be dead then.
What I am saying is that these defaulted loans can really hammer the bottom line and to be honest I did not research this enough before I leapt into FS.
5) my final point is this:
I am worried that there are far too many sub-prime loans in the overall p2p market and some of these loans are constantly getting churned through various companies - well sooner or later the music is going to stop e.g. when we have the next financial downturn. I am not convinced all of the p2p companies have been stress-tested enough to deal with this and short-term contagion will damage the entire p2p market which will put several smaller players out of business
Just my opinion...
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mjc
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Post by mjc on Oct 14, 2018 14:43:29 GMT
I would agree, and yes I was thinking of FS developer loans (don’t know enough about others).
Some valuations seem optimistic but the valuers say they have xyz qualifications and years of experience - who am I to cast aspersions? And they say they are insured. Yes, let’s see the colour of yer money then!
It seems they are taking a lot of hope value into account, IF we get PP. If all of them sell at this price we will get ...... enough to repay.
If such a Valuation was of any real use to lenders, I thought an asset backed investment would sometimes produce a small loss, never a wipe out. But these “ranks behind” loans seem to be a pile of 💩 and very high risk - not fully flagged up by those that have a duty of care. Let’s have some real life statistics that are not all spin.
If property prices crashed say 25%, I was anticipating many loans might be short 20-30%, but by holding on for 5 years most would recover at least the principal. I don’t think so now. Might be more like penny shares.
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trium
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Post by trium on Oct 17, 2018 1:09:13 GMT
I would say FS should do the maths for all applicants and also determine how valid their business models are - e.g. are they genuine and comitted developers with a feasible project with a continengy plan or scam merchants To be fair FS openly declare that they lend against assets and not people. They don't do DD on borrowers - if the asset value covers it they will "probably" get the loan (click on the "Borrow Money" tab to see their lending criteria). It's all about the valuation - if it's good we can't go wrong, but if it's pants ...
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Godanubis
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Anubis is known as the god of death and is the oldest and most popular of ancient Egyptian deities.
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Post by Godanubis on Oct 17, 2018 10:12:41 GMT
I would say FS should do the maths for all applicants and also determine how valid their business models are - e.g. are they genuine and comitted developers with a feasible project with a continengy plan or scam merchants To be fair FS openly declare that they lend against assets and not people. They don't do DD on borrowers - if the asset value covers it they will "probably" get the loan (click on the "Borrow Money" tab to see their lending criteria). It's all about the valuation - if it's good we can't go wrong, but if it's pants ... I agree the only thing they need right is the valuations. Preferably there should be a viable exit strategy. With bling then a commitment from a buyer should be obtained at repayment price. Loans for property/development should only be traunch based with revaluation throughout and only on current 65% asset value not GDV. Loans requiring funding by larger developers should be based on security of 100% made up on different assets (ie plant etc)
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adrian77
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Post by adrian77 on Oct 17, 2018 10:20:56 GMT
exactly -this is how I remember my funding and as to the valuation I think more emphasis should be placed on the 90 day disposal valuation. It is not ideal having a £800K loan on a £1m house if you have to wait 1 year for a sale or take £750K for a quick sale!
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