kaya
Member of DD Central
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Post by kaya on Apr 1, 2016 8:56:09 GMT
As loans lose payments, need holidays, go late, default, or drop dead into liquidation, like a viral contagion spreading through the loanbook (note: this is an analogy, there is no such thing as a loanbook virus!), and lenders sell loans (if they can), withdraw funds, and nervously await who might be next, what can Rebs do to survive? If new loans fail to fill, is the platform doomed? Are lenders at risk? What can they do to restore confidance?
Personally, I hav'nt completely given up with Rebs yet, there are probably many good loans left, but I suspect they need to make serious changes to how they source loans, and quickly. Although every party concerned ( borrowers, agents, platforms, lenders) ultimately wants to make a profit, when a loan defaults, it is the borrower, the agent, and the platform (through upfront fees) that gain, and it is we lenders that pay for it all.
So can Rebs survive? What do they need to do?
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merlin
Minor shareholder in Assetz and many other companies.
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Post by merlin on Apr 1, 2016 9:33:57 GMT
Certainly it looks from the outside as though REBS have more than just a few problems right now. When things started to look unhappy last year I sold up as much as I could of my holding and I know many others did as well. However if those of us that pulled stumps are matched by new investors joining then maybe they than can at least survive.
One of the things that surprise me is that only a small number of investors seem to read this Forum so don't pickup on all the bad news.
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Post by davee39 on Apr 1, 2016 9:59:09 GMT
This is not REBS specific. My FC portfolio has suffered a significant increase in losses in recent weeks. There are many signs that FC is struggling which cannot be a good indicator for the smaller players.
There are too many minor platforms lending to individuals and businesses which have not found a sustainable niche.
A game changer might be the entry of Hargreaves Lansdown later this year into P2P. Latest reports in the Daily Mail (ie an unreliable source) suggest this will be aimed at business lending. My guess is that it will be in the 5 - 6 % range with a provision fund. With increasing regulation the days of high rate, high risk loans aimed at individual investors seem to be numbered, these loans are better suited to risk taking institutions which can manage a diversified portfolio. In a fire sale a cash strapped P2P platform might well be snapped up by an investment trust and re-focused towards institutional loans.
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Post by captainconfident on Apr 1, 2016 10:22:20 GMT
I do not think it is at all fair to be speculating about the viability of a business on a public forum.
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merlin
Minor shareholder in Assetz and many other companies.
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Post by merlin on Apr 1, 2016 11:26:31 GMT
I do not think it is at all fair to be speculating about the viability of a business on a public forum. So what would you like to do? Ban all the business pages in Newspapers or indeed kill of the FT. All of these speculate about the fortunes or otherwise of business activities and the stock market thrives on rumour.
I believe that comment on the viability of any business is healthy and plays an import role in keeping businesses honest!
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Post by captainconfident on Apr 1, 2016 11:43:01 GMT
There is a difference between fact based discussion from known sources and speculation from anonymised entities.
Rebs lending opportunities are to high risk borrowers. In the long term a balanced portfolio held here will probably average 7 or 8%. There will be lots of payment problems and defaults. If you did not realise that lenders paying 15 - 20% interest might not find repayments easy then you were mistaken. Crying and lamenting on this forum at every default simply exposes your poor understanding of risk.
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Post by mrclondon on Apr 1, 2016 11:52:57 GMT
This is not a ReBS specific issue, but one of hopelessly unrealistic expectations on the part of far too many lenders of the net returns that can be achieved via p2p lending, and of the length of time it will take to complete recoveries of those loans which are recoverable (many years).
Can anyone share actual XIRR returns averaged over the last 3 years of a diversified ReBS portfolio ? Based on the performance of other similar platforms it should be in the region of 4 to 6% pa. (I'm not a ReBS lender so can't comment further, I do though have several hundred defaulted loans on FC and over 20 on FK, with examples on both platforms of borrowers possibly obtaining funds by deception, examples on both of inadequate action from the platform as certain loans started to go bad, and examples on both of loans going bad very shortly after drawdown of the funds. )
kaya has started a thread on the general board, it would be helpful if discussion could continue there, apart from any ReBS specific issues which don't apply to other similar platforms offering unsecured loans.
EDIT: cross posted with captainconfident , I agree in principal with his 7-8% pa long term once all default recoveries have been received, my 4-6% pa is based on a live loan book with recoveries outstanding.
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Post by GSV3MIaC on Apr 1, 2016 15:05:51 GMT
That's definitely true, but from my perspective (and I have been a small ReBS lender for ages) there have definitely been too many dodgy losses recently (out and out fraud where the lender had other loans they didn't disclose, cheques which bounced, having been in the post for a while, etc.). Maybe just a bad statistical break .. worsened by the relatively small loan throughput of ReBS compared to FC for instance. The website has issues too .. both with advertising rates which are never going to be met, and with showing calculated rates which I can't align with reality (right now I show £404 of interest, £247 of bad debts/defaults, £25 of net income from sales/promotions .. and somehow that computes to 17% gross return and -5% net return? How do you work that out then? Unless the return figures are just for the last year perhaps .. it does say 'annual', but that is ambiguous?). I was as diversified as it is possible to get (ie about a tenner in everything).
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Post by rebsrep on Apr 1, 2016 17:42:20 GMT
That's definitely true, but from my perspective (and I have been a small ReBS lender for ages) there have definitely been too many dodgy losses recently (out and out fraud where the lender had other loans they didn't disclose, cheques which bounced, having been in the post for a while, etc.). Maybe just a bad statistical break .. worsened by the relatively small loan throughput of ReBS compared to FC for instance. The website has issues too .. both with advertising rates which are never going to be met, and with showing calculated rates which I can't align with reality (right now I show £404 of interest, £247 of bad debts/defaults, £25 of net income from sales/promotions .. and somehow that computes to 17% gross return and -5% net return? How do you work that out then? Unless the return figures are just for the last year perhaps .. it does say 'annual', but that is ambiguous?). I was as diversified as it is possible to get (ie about a tenner in everything). We are aware that the Net Return figure needs work, we have a new calculation in the pipeline, but it needs to work for all users to show a true and fair view. Each iteration gets better but there are subsets of lenders that it would show a misleading figure for either grossly over under stated as to be misleading. Examples of subsets: e.g. lenders that have sold off everything but the bad loans Those with high promotional credits Those that have never withdrawn anything and have always reinvested (very high compound returns) Those that always bid low % Those that always flip loans etc etc
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Post by GSV3MIaC on Apr 1, 2016 20:02:18 GMT
I like XIRR, or reasonable equivalent. Of course you may need to work it iteratively, given irregular cash flows, and you can still disagree about timings (i.e. if I take out half my holding in cash, is it the date when it left ReBS or when it arrived back somewhere useful?) .. however it copes pretty well with the cases you listed. When you come up with a figure you are happy with, I'll let you know if you are close to my XIRR type number. 8>.
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am
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Post by am on Apr 1, 2016 21:29:21 GMT
A point that may be worth bearing in mind that lenders will have a tendency to assume that the performance of their portfolio is typical of the platform as a whole, and that they will also have a tendency to be wrong on this. I have seen reports of people losing money on FC. (After 3 years I have an "annualised return" of over 9% on a conservative portfolio, and two defaulted loans out of 310, with a current bad debt exposure of £25, though there are another couple of loans now looking iffy.) I have seen reports of people losing money at AC. (I've only been there for 15 months, with one loan out of 50+ going bad, with full recovery of capital and interest.) With respect of bad debt, I suppose I should add whatever RS have hidden from me with the aid of the provision fund, but, repeating myself, this is hidden from me.
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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 Apr 1, 2016 22:36:29 GMT
Regardless of the number of defaults, ReBs need to keep filling new loans, and that isn't happening at the moment. Loans are struggling to fill on most sites and we are seeing cashback and bonuses offered. ReBs need to be more proactive. I suggested upping the interest rate automatically if loans don't fill, they liked it, but it hasn't happened. rebsrepI now suggest you start the bidding at 20% for A, 25% for B loans and 30% for C loans. It may seem drastic but that's what the current market demands.
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kaya
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Post by kaya on Apr 3, 2016 10:49:11 GMT
Gosh, 30% start rate? That may indeed be getting closer to reflecting the actual risk, but it would weigh even heavier on repayments. Could any business afford that?
It seems like both current auctions will fail to attract bids to cover more than 50% of the loan requested, even though one of them seems quite reasonable, and with fair security (if we can believe in it. The personal guarentee insurance, for example, could easily become worthless unless Rebs administer it).
Personally, I think that a real change in management/director approach is required at Rebs, concerning how they source loans, how they are presented in the profiles, and regarding security.
It was always high risk, the higher rates reflected that, but now the platform reaps what has been sown. Lenders have been pulled into too many loans that have not delivered. We expect some losses, but cannot afford to fund the mistakes and deceptions of others. Granted, there is plenty of dodgy loans and deceptive defaults over at FC, and personaly I blame myself at least partly for investing in 'maverick' businesses at Rebs. All too easy to say after the fact of course. If I can finish up with a net return at Ratesetter or Zopa levels I'll be delighted.
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Post by jh on Apr 3, 2016 21:03:49 GMT
Regardless of the number of defaults, ReBs need to keep filling new loans, and that isn't happening at the moment. Loans are struggling to fill on most sites and we are seeing cashback and bonuses offered. ReBs need to be more proactive. I suggested upping the interest rate automatically if loans don't fill, they liked it, but it hasn't happened. rebsrep I now suggest you start the bidding at 20% for A, 25% for B loans and 30% for C loans. It may seem drastic but that's what the current market demands. From an introducer (am also an investor) the above rates would discourage most borrowers from applying. Those that did, I would anticipate being those that represent the higher risk and more separate for the funds. I do agree more loans need to be listed. Underwriting across all p2p platforms has tightened and we are seeing 4 out of 5 rejected.
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wysiati
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Post by wysiati on Apr 3, 2016 23:37:25 GMT
"I'm not a ReBS lender so can't comment further, I do though have several hundred defaulted loans on FC and over 20 on FK,..."
Do you perhaps want to verify/reconsider that statement with regard to FC defaults? Are you using your own definition? Looking at the total number of loans orginated loans (18,015), defaults (414), recoveries (219) on the FC stats page your claims appear a little difficult to reconcile with the published data. If it is also true that you have not been an active participant on FC in the near-to-medium-term then it makes your claim of "several hundred defaulted loans on FC" even more incredible. If you have indeed managed to achieve a similar number or even more defaults on FC via loan selection than the FC total marketplace has in stated defaults/recoveries then you are likely to have underperformed the much criticised 'autobid' facility and could quite possibly be such a consistent source of negative alpha that other forum users would benefit from using your decisions as a contrarian indicator. Perhaps you could charge a consultancy fee for access to your methodology and picks?
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