shimself
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Post by shimself on Apr 3, 2016 23:42:43 GMT
... 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. Has anyone inspected to see if A-B-C ratings are born out by the loans in trouble?
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Post by mrclondon on Apr 3, 2016 23:56:24 GMT
wysiati its a bit to late for me to look up the exact figures immediately and I accept that possibly "over 200" might have been more accurate than "several hundred", but your comment about using my own definition will definitely apply. It will include all loans that have been downgraded, all loans that are late repeatedly, all loans that have formally defaulted whether recovered or not.
EDIT: wysiati yes, "I do though have over 200 defaulted, downgraded and currently late loans with FC" would have been more accurate. Apologies for my earlier loose language. Of the c. 3500 loans written by FC from launch until the end of 2013 when I ceased lending with FC, the loanbook stats csv download shows 350 have defaulted and 30 are currently late (so 10% of the loans from 2010-13 have now defaulted) The interesting thing is I have exposure to rather over half of the distressed loans, and lent on rather over half of the loans. So the copious amount of time I spent selecting loans did no better than autobid, and this is also reflected in my XIRR of 6.5% being the same figure that FC were suggesting at the time as the net yield for a fully diversified loanbook.
Also worth adding, I didn't trade / flip, I bought to hold.
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Post by jackpease on Apr 4, 2016 7:56:25 GMT
So the copious amount of time I spent selecting loans did no better than autobid, and this is also reflected in my XIRR of 6.5% being the same figure that FC were suggesting at the time as the net yield for a fully diversified loanbook.
That reflects my experience - i started off imagining i could suss out the dodgy loans - and because of the lag I thought I was doing well. Then the defaults started piling up. Likewise Assetz, FK and Rebs - i thought i could spot the bad 'uns - nope - if they can fool the platform then they can certainly fool me. Armed with the knowledge that i am not capable of spotting bad ones i changed strategy and do now make a reasonable return on FC (even accounting for the lag before you get defaults). Because i can't spot duds I've started to become very cautious with SS now risk is on our head not the platform If people genuinely believe they can spot duds i think they could make a lot of money on Rebs if the platform is in it for the long term Jack P
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shimself
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Post by shimself on Apr 4, 2016 13:55:31 GMT
... 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. Has anyone inspected to see if A-B-C ratings are born out by the loans in trouble? Sort of answering my own question Of the problem loans I know about vs the loans I know about A 3 of 13 B 6 of 29C 3 of 49 Conclusion so C is safest BY A MILE (and yields an average 17.5% gross), then B (15.9% gross) and A (13.6% gross) is the riskiest. Caveats These are loans I know about not the entire loan book. These figures are simple averages. It does not take any account of size of loan, of the size of the default as a proportion of the loan and whatever else. Discussion I never took any notice of A B C ratings, I didn't realise it was actually the opposite of the truth (based on my sample). I'll make a guess: perhaps some the A loans are based on accounts which have been massaged by the borrower, and if you are going to massage them you might as well make them look quite good. Recommendation REBS You should stop ratings henceforth if my sample is representative
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wysiati
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Post by wysiati on Apr 4, 2016 14:29:54 GMT
mrclondon Thank you for the clarification - given your contributions on this forum in particular it seemed difficult to conceive that you would have had such an extreme hit rate in terms of defaults. Your experience probably just reflects the difficulty of generating alpha in a lemons market with the information asymmetries etc, particularly on a platform where the quality of information provided with a loan proposition is relatively poor and, in many cases, unverifiable. I think some of the (admittedly now outdated) data published by FC itself suggested that, up to that point at least, active loan pickers had in aggregate failed to outerform autobid. With the introduction of fixed rates and the (current) reduction of promotions such as cashback it is arguably going to be even harder for many participants to reliably outperform even the naive FC autobid approach. So, while there might be some satisfaction that strategies such as flipping, requiring no real repeatable skill, may be less well remunerated, particularly relative to buy-and-hold, the loan picker cannot necessarily expect to benefit in terms of their own returns. Bringing this back to REBS a bit, I can't speak to current defaults as I exited c.2 years ago with an XIRR of c.15% having decided to effectively pay where necessary to get out. Survivability in terms of a run of defaults is inevitably bound up with many factors, not least confidence and the basic economics of whether there is enough performing back book and throughput on the platform for it to be viable as a going concern. There will be a risk of individuals extrapolating from their own experience to the platform as a whole which will be problematic for the smaller/newer players experiencing any such 'run' of defaults. While some view their FC experience as intolerable in terms of losses from bad debts we can look at the projections which have been there from the start and FC would likely counter with the argument that bad debt performance remains 'on track' and within those expectations, and that the debt model will be adjusted dynamically to achieve these (FWIW, I personally don't have much trust in black box models in this environment but there you are). Admittedly, we have not seen how these loans will perform over a full credit cycle and we could well see an overshoot if underwriting standards have been relaxed too much for recent vintages in response to lower than expected realised losses for the back book (and for some older vintages the peak gap which had opened up (cumulative realised bad debt < cumulative forecast bad debt) has already seen a sustained reversal). AIUI, REBS has never published expected default rates so there is no benchmark against which to even attempt to measure loan/underwriting performance. Where REBS is really disadvantaged vs. FC and some others is in terms of the size/breadth of the installed lender base, not just to fund new loan propositions but to facilitate portfolio liquidation even under normal conditions, which was one of the main reasons for my exit. On FC etc there can arguably be greater confidence in secondary market liquidity with enough participants using less (re)active strategies to enable the more nimble to exit a significant portion of their positions should the need/desire arise, at least at first, and barring drastic action such as the use of gating mechanisms. For the sake of completeness, the FC loan stats page currently shows 92 loans late <30 days, 73 loans late >=30 days, and 17 loans late >= 90 days, to add to the 414 Recoveries (including partial recoveries) and 219 Bad debts out of 18015 originated loans, of which 3617 have been fully repaid.
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wysiati
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Post by wysiati on Apr 4, 2016 14:46:44 GMT
Has anyone inspected to see if A-B-C ratings are born out by the loans in trouble? ... Conclusion so C is safest BY A MILE (and yields an average 17.5% gross), then B (15.9% gross) and A (13.6% gross) is the riskiest. ... Even with the caveats you mention in the full post it would be a mistake to conclude that any particular risk band is the safest based on the information presented, particularly with such a high expressed degree of confidence. Problems include the risk bands being based on more than just incidences of default but also the expected loss given default etc (the realised values of which can take years to determine where defaults do occur), the risk/error of naively extrapolating and treating the status of even the full current loan book as necessarily representative of performance over its life and particularly of new loans yet to be funded, etc etc.
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kaya
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Post by kaya on Apr 4, 2016 15:35:09 GMT
Panic selling? A brand new 'C' loan is now on sale at -5%. When they're gone, they're gone!
{Edit} mistake, its not a new loan, one payment made.
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Post by rebsrep on Apr 5, 2016 8:16:39 GMT
Panic selling? A brand new 'C' loan is now on sale at -5%. When they're gone, they're gone! {Edit} mistake, its not a new loan, one payment made. kaya yet again you are raising negative issues without stating all the facts. There are 5 loans currently with 1 payment made so far. Of those: 1) Has no ML's for sale, but that's because trading is not open yet as the legals are not yet complete, but repayments have been made and interest is accruing. 2) 22 of the Top 100 loans listed are discounted and the highest buyer rate only has a 0.5% discount: 19.37% 3) 9 of the Top 100 loans listed are discounted with the highest buyer rate only a 0.25% discount: Net buyer return:16.12% 4) 14 of the Top 100 loans listed are discounted with the highest buyer rate actually a premium of 1%: Net buyer return: 16.53% 5) (The loan I presume you are referring to) is the refactored L** J*** which is the subject of another thread, so it's not a new loan (and I'm sure you are very aware of that) The highest buyer rate is a 4% discount and buyer rate of 21.99%. We admit we do need to make it clearer that this is a refactored loan and I personally requested this change was made and it's now in the devlopment pipeline (it's our 1st refactored loan so needs development work to display it correctly) For the purposes of completeness below is the communciation that was issued on Monday morning this week when loan 5 above was refactored: "I am writing with an update in regard to your loan with L** J*** Limited. In our last update, sent on 16th March 2016, Michael informed you that we had established a repayment plan with Ms W*** and that we were in the process of formalising this and ensuring that the correct paper work was in place and the PGI reinstated. I’m pleased to be able to inform you that Ms W*** has now made her first repayment according to the new repayment schedule and that agreement has now been formalised. Furthermore, Ms W*** has also provided evidence of the renewed PGI, the debenture remains in place. Future repayments have also been set up to be received via Direct Debit. The loan has now been refactored and the correct repayment table is now showing for you. We’re also pleased to inform you that micro loans may now be traded on the secondary market. I understand when the refactoring process completed on Friday evening, there was an error in the process, which incorrectly debit your lending account. This was immediately corrected and your balance and statement should now be correct. Sorry for the inconvenience caused. In our recent communication with Ms W*** she has informed us that: 1. The dispute with the distributor which is said to be the cause of the cash flow issues has not been completely resolved. Ms W**** has said that they could not afford solicitors fees to take the distributor to court and has made an arrangement with the distributor whereby they pay L** J*** £700 a month until the disputed amount is settled. 2. Ms W*** says: “We have slowly rebuilt our business back with the help of family and friends and have started re selling with outlets such as Amazon, eBay and also through our website.” 3. L** J*** are in the process of finding a new distributor and will begin targeting retail shops and picking up with Holland and Barret once they find the right distributor who will be able understand the needs of the business. We thank you for your patience and support throughout this process. We will continue to maintain regular contact with Ms W*** as to her progress and will keep you informed. We hope that if you are in a position to, or know anyone or have contacts that may be able to assist Ms Westfield and the growth of L** J***, to put them in contact with Ms W*** directly or forward us the details so that we may pass them on. Rebuildingsociety encourages lender and borrower engagement, so that the businesses lent to by the community may continue to grow and prosper for the benefit of the community as a whole.
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Post by rebsrep on Apr 5, 2016 8:20:08 GMT
... Conclusion so C is safest BY A MILE (and yields an average 17.5% gross), then B (15.9% gross) and A (13.6% gross) is the riskiest. ... Even with the caveats you mention in the full post it would be a mistake to conclude that any particular risk band is the safest based on the information presented, particularly with such a high expressed degree of confidence. Problems include the risk bands being based on more than just incidences of default but also the expected loss given default etc (the realised values of which can take years to determine where defaults do occur), the risk/error of naively extrapolating and treating the status of even the full current loan book as necessarily representative of performance over its life and particularly of new loans yet to be funded, etc etc. Here is our actual stats page: www.rebuildingsociety.com/stats/
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Post by rebsrep on Apr 5, 2016 8:31:26 GMT
I just checked our SM.
There are currently 107 different loans for sale. Of those only 15 have -5% discounts applied and these are typically the loans that have well publicised troubles. 1 @ -4% 4 @ -3%+ 17 @ -2%+ 19 @ -1% + 7 @ -0.25%+
The rest are at Par or a Premium. Hardly panic selling across the board.
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shimself
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Post by shimself on Apr 5, 2016 9:02:07 GMT
and the summary is within half a percentage point the same as my sample C is safest BY A MILE (and yields an average 17.5% 17.4% gross), then B ( 15.9% 15.8% gross) and A ( 13.6% 13.2% gross) is the riskiest. What is the point of your rating system if it only serves to mislead?
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Post by dodgeydave on Apr 5, 2016 9:24:23 GMT
Should it read 2 live loan Auctions as one is closed to bids ??
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kaya
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Post by kaya on Apr 5, 2016 11:36:20 GMT
Rebsrep, you really should get your facts right before posting inaccurate information and making accusations of being 'negative'. The loan I was referring to was the drainage/plumbing company loan, which had several top rate micro-loans (at 20%), listed at a 5% discount ( so giving a rate of above 22.5%). This was such an unusually generous offer for a very new loan, with no repayment problems, from someone apparently wanting to exit their new investment asap, and at a loss. If that's not 'panic selling', I don't know what it. Was I trying to 'raise negative issues'? Absolutely not, I was merely offering comment and asking the question, and even letting others know that a potentially good deal was available (they are all sold now, unless they were cancelled)
I find it concerning that Rebs apparently do not think that there is 'trouble down at Rebs' (see thread in general discussion). The two current loan applications are failing to fill even 50%, even after extensions, and if that is not trouble, then what is?
Rather than going on the defensive about every perceived 'negative' post on this forum (which only a small percentage of Rebs investors probably read anyway), Rebs need to take real action to restore confidance. New loan applications are not filling because lenders have lost confidance, especially in the security offered, and are now holding back and waiting, it would seem, to see how current defaulted loans turn out re security/recovery.
I personally have made recent positive comment re the recently recovered L** J*** loan, re good paying older loans, and re one of the current loan applications. The latest default to hit me understandably created a reaction and a desire to exit Rebs (as some seem to be doing), but rather than panic-selling, I am still perservering for now, though I have reduced somewhat.
Lenders need to see real security in place that they can really trust if confidance is to be restored. That might mean making real changes at Rebs, like offering hard security on assets, like property, personal assets (the car, say!), and at reduced or fixed rates if neccessary. It is just too easy for borrowers to walk away from their commitments otherwise. There is always risk, but lenders are going to need more protection. PG Insurance needs to be administered by Rebs.
So rather than getting hyper-sensitive to any perveived negativity, and pretending that there is 'no trouble', please get together and figure out what to do! I wish everyone at Rebs well, and hope that you can sort things out and restore confidance. There is, after all, many good loans (I hope!) still on the Rebs loanbook.
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Post by rebsrep on Apr 5, 2016 12:12:12 GMT
kaya Thank you for that last post. Nicely put and reassuring. You didn't mention it was a drainage and plumbing company, just a "new loan with 1 repayment made" so I filtered our loan book on number of repayments and found 5 with 1 repayment. On the security aspect, we do have plans to beef up security and attract better loans. But developing new features and obtaining a pipeline of loans that fit a new loan profile will take time to feed through to the site. When the new schemes/features are ready we will of course announce them.
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Post by badger on Apr 6, 2016 22:55:07 GMT
There's a thread on the General board that says (if I'm reading it correctly) that any losses incurred 2015-2016 can be offset against interest income across all platforms, when filling out your tax return. So for a basic rate taxpayer, the impact of the losses is reduced by 20% providing you've made more in total interest income than you've lost in defaults.
However, in 2016-2017, the first £1000 of interest income will not be taxable. That's great news, but it also means that the offsetting of losses will have less impact. Whether it's deliberate or not, ReBS might have done us a small favour by declaring all those recent losses rather than waiting until after April 5th
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