09dolphin
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Post by 09dolphin on Aug 10, 2017 6:49:20 GMT
Many of us are dismayed at the number of loans that last well over the original 6 months and the apparent inability of FS to manage the late loans. Can I suggest a contractual change that may help to mitigate the anger of investors and benefit the borrowers of future loans.
Loan interest can continue to be paid at the end of the contractual period (6 months) BUT at the end of each subsequent month, where the loan is not repaid, monthly interest must paid for 7th month and each successive month until the loan is redeemed. If the interest is not paid within a reasonable period of it becoming due then there should be an automatic default (ie 4 weeks).
In all honesty I wouldn't care if the interest payments are made to investors monthly, 6 monthly or even yearly - but perhaps there could be consultation with investors if such a change was made.
Another alternative would be to transfer the existing loan to a new loan (including the interest) and allow the borrower to pay the loan off in monthly instalments over a specific period of years.
The effect of either of these changes would be that the LTV would not significantly increase because of delayed repayment, the interest would not become an almost intolerable burden for the borrower and FS would appear more transparent in their management of late loans. Of course if FS have a great deal of faith or confidence in the loan (as they often say in the updates) they could "lend" the borrower the money to pay their monthly interest as a separate agreement.
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locutus
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Post by locutus on Aug 10, 2017 7:32:59 GMT
Many of us are dismayed at the number of loans that last well over the original 6 months and the apparent inability of FS to manage the late loans. Can I suggest a contractual change that may help to mitigate the anger of investors and benefit the borrowers of future loans.
Loan interest can continue to be paid at the end of the contractual period (6 months) BUT at the end of each subsequent month, where the loan is not repaid, monthly interest must paid for 7th month and each successive month until the loan is redeemed. If the interest is not paid within a reasonable period of it becoming due then there should be an automatic default (ie 4 weeks).
In all honesty I wouldn't care if the interest payments are made to investors monthly, 6 monthly or even yearly - but perhaps there could be consultation with investors if such a change was made.
Another alternative would be to transfer the existing loan to a new loan (including the interest) and allow the borrower to pay the loan off in monthly instalments over a specific period of years.
The effect of either of these changes would be that the LTV would not significantly increase because of delayed repayment, the interest would not become an almost intolerable burden for the borrower and FS would appear more transparent in their management of late loans. Of course if FS have a great deal of faith or confidence in the loan (as they often say in the updates) they could "lend" the borrower the money to pay their monthly interest as a separate agreement. Why complicate a simple business model? These are secured loans and if the borrower doesn't pay, the loan should be defaulted and the security disposed of to reimburse the lenders. Obviously, FS should show some judgement when a borrower is cooperating especially when a small grace period will allow successful redemption but otherwise the model is as old as time and works very well. The issue here is FS's unwillingness to default a loan in a timely manner which then leads to interest snowballing and leaving the borrower in control of the situation. FS simply need to be more aggressive in defaulting loans unless the borrower can provide verifiable evidence why that is not the best course of action.
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sqh
Member of DD Central
Before P2P, savers put a guinea in a piggy bank, now they smash the banks to become guinea pigs.
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Post by sqh on Aug 10, 2017 8:05:59 GMT
Loan 2805000793 has today been declared irrecoverable in accordance with SAIM 12050, and therefore defaulted.
This loan was due for repayment 28th May, it's only 10 weeks overdue, so maybe FS are listening and getting tough with borrowers.
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locutus
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Post by locutus on Aug 10, 2017 8:21:16 GMT
Loan 2805000793 has today been declared irrecoverable in accordance with SAIM 12050, and therefore defaulted. This loan was due for repayment 28th May, it's only 10 weeks overdue, so maybe FS are listening and getting tough with borrowers. Personally, I would default after 1 week unless the borrower has made contact and is cooperating with an alternative repayment option. They could still do better.
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merlin
Minor shareholder in Assetz and many other companies.
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Post by merlin on Aug 10, 2017 9:00:33 GMT
locutus I am sure has summed up the sentiments of most of us regarding late repayment. Much has already been said about this not just with FS but with all the other P2P providers. However the providers have a significant incentive not to foreclose because foreclosure ruins their statistics regarding losses. Most of them have made some outrageous claims about losses in the past whilst sitting on a pile of irrecoverable loans. It would be unfair to pick out any provider but many of them would look exceedingly sick if they did foreclose on the loans that they know are dead ducks. I believe the FCA are only too well aware of this problem and are proposing to do something about it. Just what I haven't got a clue but as locutus has already pointed out there is a lot of past history about this, most created long before P2P came about. I am sure most P2P providers play on this factor.
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jj
Member of DD Central
Jolly Jammy
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Post by jj on Aug 10, 2017 12:39:17 GMT
Hello all,
I am just finishing my first round (6 months) with FS and I have three loans that were due to be paid back and ALL three have not.
Now I don't mind that as such but I have two points that should really to be addressed in my opinion.
First point is if the borrower has failed to pay the loan back or has not arranged other alternative options the loan should go into default immediately with a default rate of interest.
This would encourage the borrower to resolve the situation quickly.
Secondly, why is there not a loan update by FS ? The borrow has failed to pay back the loan and no update. There needs to be an update to alleviate lenders' fears.
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ozboy
Member of DD Central
Mine's a Large One! (Snigger, snigger .......)
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Post by ozboy on Aug 10, 2017 12:44:29 GMT
Loan 2805000793 has today been declared irrecoverable in accordance with SAIM 12050, and therefore defaulted. This loan was due for repayment 28th May, it's only 10 weeks overdue, so maybe FS are listening and getting tough with borrowers.Personally, I would default after 1 week unless the borrower has made contact and is cooperating with an alternative repayment option. They could still do better. Or just maybe the Valuation and LTV are correct for once and FS know Capital & Interest will be returned?
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peteuk
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Post by peteuk on Aug 10, 2017 21:32:23 GMT
You hit the nail on the head ,the loans they default in a timely manor are good loans where the valuation is correct, the loans that are six months or more in arrears are loans that are going to cost the investers half there money or more i have been with FS before they went to land and property and never lost a penny on the pawn loans even with multiple defaults, But am now expecting losses when and if they ever get round to defaulting them the real difference is if a guy pawns his bike and does not pay you sell the bike,if a developer borrows money to buy land with planning more often than not he has no skin in the game but gets over that by a dodgy valuation, and then telling FS he got it below its true value, because FS is a pawn site they dont hold back any interest where you could at least get back 6 or 12% of your loan through monthly interest payments. The only reason they are still afloat is the ifisa but if a loangoes bad it does not really matter a loss is a loss
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spyrogyra
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Post by spyrogyra on Aug 14, 2017 11:40:38 GMT
FS needs to up their game. They can't rely on the relative ease with which they fill loans at the moment. If they ignore lenders' opinions sooner or later they will share the fate of Lendy. Updates are quite vague. First, most updates do not appear under the "update" tab but under "assets" . A fresh example of a bad update is tomorrow's renewal for the Anfield loan. The update says "There has been a small delay in the development, relating to the provision of services, which has now been resolved". The update does not inform lenders what real progress was made after a loan with further 2 tranches. The only real information about the developer's progress is from Feb - "began foundations" I can't convince myself to put money in it and those that will, should think twice.
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Post by diversifier on Aug 14, 2017 12:09:47 GMT
Personally, I would default after 1 week unless the borrower has made contact and is cooperating with an alternative repayment option. They could still do better. Or just maybe the Valuation and LTV are correct for once and FS know Capital & Interest will be returned? So what? And this is a genuine question I have about FS. The pawnshop model is NOT to only take the outstanding debt. If the borrower fails to redeem, the pawnshop gets to keep the whole value of the security, right? How/why is FS different? Sure, there is a cost to defaulting the loan, because there is a cost-to-sell, and also you are crystallising a risk on the LTV. But if RS has got the LTV correct, surely if the loan defaults, then minus selling costs, the residual is profit? Who gets that profit? Given the fixed-interest model, my assumption is that it is FS itself. But that doesn't seem to square with their reluctance to actively default loans. So, what gives?
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bg
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Post by bg on Aug 14, 2017 12:17:02 GMT
Or just maybe the Valuation and LTV are correct for once and FS know Capital & Interest will be returned? So what? And this is a genuine question I have about FS. The pawnshop model is NOT to only take the outstanding debt. If the borrower fails to redeem, the pawnshop gets to keep the whole value of the security, right? How/why is FS different? Sure, there is a cost to defaulting the loan, because there is a cost-to-sell, and also you are crystallising a risk on the LTV. But if RS has got the LTV correct, surely if the loan defaults, then minus selling costs, the residual is profit? Who gets that profit? Given the fixed-interest model, my assumption is that it is FS itself. But that doesn't seem to square with their reluctance to actively default loans. So, what gives? No, the pawnshop only gets to keep the profit if the value is less than £75. Any more and they have to pay the excess back to the borrower. Besides for the most part FS is doing bridging loans not pawn.
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spyrogyra
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Post by spyrogyra on Aug 14, 2017 12:36:43 GMT
You seems to forget the receiver's fee. FS can't simply sell it, they need to pass it to a receiver who has an obligation to achieve the best price. Which , imo, is unfair as these are commercial loans and the borrowers can walk away anytime they want to. Why should anyone owe them any if they didn't repay, lied and did not co-operated?
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Post by diversifier on Aug 14, 2017 13:03:44 GMT
So what? And this is a genuine question I have about FS. The pawnshop model is NOT to only take the outstanding debt. If the borrower fails to redeem, the pawnshop gets to keep the whole value of the security, right? How/why is FS different? Sure, there is a cost to defaulting the loan, because there is a cost-to-sell, and also you are crystallising a risk on the LTV. But if RS has got the LTV correct, surely if the loan defaults, then minus selling costs, the residual is profit? Who gets that profit? Given the fixed-interest model, my assumption is that it is FS itself. But that doesn't seem to square with their reluctance to actively default loans. So, what gives? No, the pawnshop only gets to keep the profit if the value is less than £75. Any more and they have to pay the excess back to the borrower. Besides for the most part FS is doing bridging loans not pawn. Ok...it seems that I haven't done my DD about this business model. Oops. Then I'm OUT. ASAP. I thought this was a two-sided risk if LTV estimate was wrong. But it seems like heads-they-win-tails-I-don't-win. For interest then: as a practical matter, how does this work e.g. if LTV is correct at 60% on a [bridging loan or jewellery], why *wouldn't* FS simply immediately default the loan and put it to auction at ~70% nominal value as reserve? Neither FS nor FS investors have any skin-in-the-game on the valuation loss. *Or do we*?! If we do, that's just made it 100x worse. Is there any contractual requirement that FS have any duty at all towards the original borrower to at least attempt recovery to nominal book-value? Then we stand to hang around failing to sell at auction, attempting to recover an inflated valuation estimate *on the borrowers behalf*. But if *not*, then FS can simply take an internal decision to sell well-below-market value to a "lucky" counterparty, who stand to make out like bandits on exactly and only property post-selected as good-uns after default. I think maybe I'll go stand in *that* corner of the room! I feel like an idiot. Unless someone thinks I missed something?
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SteveT
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Post by SteveT on Aug 14, 2017 13:18:50 GMT
Is there any contractual requirement that FS have any duty at all towards the original borrower to at least attempt recovery to nominal book-value? Yes. Once an LPA Receiver is appointed, they have a legal duty to sell at fair market value and return anything over and above the outstanding FS loan balance to the borrower. Suggest you Google "Law of Property Act"
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Post by diversifier on Aug 14, 2017 13:57:12 GMT
You seems to forget the receiver's fee. FS can't simply sell it, they need to pass it to a receiver who has an obligation to achieve the best price. Which , imo, is unfair as these are commercial loans and the borrowers can walk away anytime they want to. Why should anyone owe them any if they didn't repay, lied and did not co-operated? Oh. So I was right. It is 100x worse. Since FS retains the receiver, if the receiver fails to achieve a price which the *borrower* is happy with, the borrower will have recourse to sue FS investors for the gap. 1) That's not a theoretical risk. A corporate developer will do so, indeed they have fiduciary duty to their shareholders. 2) The receiver must attempt to track market-price (*not* loan-value). In a rising market, the borrower gets the increase in land value; but in a falling market, the loss comes out of FS. That's yet another heads-they-win-tails-i-lose. I'm out. To be clear, yes, my fault for not doing DD.
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