ptr120
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Post by ptr120 on Nov 30, 2016 9:32:25 GMT
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SteveT
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Post by SteveT on Nov 30, 2016 9:52:43 GMT
What is it that leaves you unimpressed? Whilst there's nothing earth-shattering there, it says pretty much what I guessed would be said on the subject of managing over-running property loans.
The principal failure, IMO, was not making this clear to inexperienced FC lenders when they first started writing property loans.
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pip
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Post by pip on Nov 30, 2016 10:01:17 GMT
Seems reasonable to me. Personally I think they should put in bold letters next to the term (indicative only). But I've come to expect some property loans to be late and even for potentially some of the borrowers to be messing us around. So far they have eventually paid up and while I don't doubt there is some real risk in property I would prefer to know there is at least something to sell to realise some recovery than for some cycle shop or accountancy firm to one day shut up shop and you can really say goodbye to all your money.
For any seasoned p2p I have little sympathy. You know you are getting good rates, you know the risk whenever lending money to anybody. You take it or you leave it. Just please everybody stop the moaning, if you don't like it don't invest.
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ptr120
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Post by ptr120 on Nov 30, 2016 10:38:51 GMT
What is it that leaves you unimpressed? 2% interest rate increase for late loans is industry standard - it isn't if you use moneything or ablrate No requirement to service late loans monthly, which is my biggest gripe We 'may' ask for additional security, not we 'will' ask for additional security Borrowers get sent an early warning letter - no commitment to send one to lenders No differentiation between property development loans, property bridging loans, and commercial mortgages A late property loan does not necessarily mean an increased credit risk - yeah, right!
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SteveT
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Post by SteveT on Nov 30, 2016 10:43:44 GMT
What is it that leaves you unimpressed? 2% interest rate increase for late loans is industry standard - it isn't if you use moneything or ablrate No requirement to service late loans monthly, which is my biggest gripeWe 'may' ask for additional security, not we 'will' ask for additional security Borrowers get sent an early warning letter - no commitment to send one to lenders No differentiation between property development loans, property bridging loans, and commercial mortgages A late property loan does not necessarily mean an increased credit risk - yeah, right! How is a borrower, struggling to finish their development so that they can get it sold, expected to service a late loan monthly, let alone at +2%? Where is the money going to come from to pay the interest? Remember that interest paid monthly during the scheduled term does not come from the borrower, it comes out of the pot of lenders' funds retained at drawdown. Once that pot is empty, there's nothing to pay interest with until the property is sold (or the loan facility refinanced).
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ptr120
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Post by ptr120 on Nov 30, 2016 11:04:40 GMT
2% interest rate increase for late loans is industry standard - it isn't if you use moneything or ablrate No requirement to service late loans monthly, which is my biggest gripeWe 'may' ask for additional security, not we 'will' ask for additional security Borrowers get sent an early warning letter - no commitment to send one to lenders No differentiation between property development loans, property bridging loans, and commercial mortgages A late property loan does not necessarily mean an increased credit risk - yeah, right! How is a borrower, struggling to finish their development so that they can get it sold, expected to service a late loan monthly, let alone at +2%? Where is the money going to come from to pay the interest? Remember that interest paid monthly during the scheduled term does not come from the borrower, it comes out of the pot of lenders' funds retained at drawdown. Once that pot is empty, there's nothing to pay interest with until the property is sold (or the loan facility refinanced). For a property development loan I would agree with you 100% However, this is where, IMHO, the policy fails as it doesn't differentiate for the other type of loans. By way of example, there are some very late loans on FC which are essentially equity release / bridging finance on an income generating asset (a hotel) - I believe this type of loan should continue to be serviced monthly (using income generated by the asset). Likewise, there are a number of commercial mortgages on FC where the borrower repays interest and (some) capital each month. If those go late, why shouldn't the borrower have to continue to repay monthly?
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SteveT
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Post by SteveT on Nov 30, 2016 11:56:10 GMT
The opening sections make it pretty clear that the document is addressing property development loans specifically (interest only to end of term) and so I think FC would say that commercial mortgages and/or equity release fall out of scope. No argument from me that these should usually be handled somewhat differently.
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blender
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Post by blender on Nov 30, 2016 12:10:42 GMT
How is a borrower, struggling to finish their development so that they can get it sold, expected to service a late loan monthly, let alone at +2%? Where is the money going to come from to pay the interest? Remember that interest paid monthly during the scheduled term does not come from the borrower, it comes out of the pot of lenders' funds retained at drawdown. Once that pot is empty, there's nothing to pay interest with until the property is sold (or the loan facility refinanced). For a property development loan I would agree with you 100% However, this is where, IMHO, the policy fails as it doesn't differentiate for the other type of loans. By way of example, there are some very late loans on FC which are essentially equity release / bridging finance on an income generating asset (a hotel) - I believe this type of loan should continue to be serviced monthly (using income generated by the asset). Likewise, there are a number of commercial mortgages on FC where the borrower repays interest and (some) capital each month. If those go late, why shouldn't the borrower have to continue to repay monthly? The borrower cannot continue to pay monthly because they do not pay monthly at all - only the borrowed interest is repaid by FC in the name of the borrower, the borrower pays nothing until the end. The real reason that FC will not entertain borrower payments is that they have no way of doing it without defaulting the loan, and they are not going to do that a month after the end date. The delay in paying the additional interest is a small matter compared with the size of the principal locked in at risk. For me the problem is that their inadequate systems mean that if you do not sell the loan parts at least a month before the scheduled end date you are trapped for the duration. We cannot judge early enough whether there will be a genuine project delay or whether the borrowers' project is in trouble. Can't take the risk. If they could extend the loan (at whatever percentage) and extend trading to match - which you would have thought a good plan - then a lender could risk hanging in there longer. But of course they cannot do that either. A dog's breakfast, and best to be out of the room before the dog starts eating.
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ptr120
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Post by ptr120 on Nov 30, 2016 13:12:08 GMT
Hi blender for a commercial property loan where they pay interest and some capital every month, my understanding is that they DO pay per month (I know that on property development loans, they don't). Equally, for a property bridging loan on an income generating asset such as the hotel, they SHOULD be required to service monthly. The fact that the FC systems can't distribute it is their problem, not mine! |
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blender
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Post by blender on Nov 30, 2016 13:34:58 GMT
Hi blender for a commercial property loan where they pay interest and some capital every month, my understanding is that they DO pay per month (I know that on property development loans, they don't). Equally, for a property bridging loan on an income generating asset such as the hotel, they SHOULD be required to service monthly. The fact that the FC systems can't distribute it is their problem, not mine! I do not think we are discussing commercial property loans - or at least I was not. Have there been any late/non-repaid commercial property loans? Of course FC should be able to run systems appropriate to the type of loan. But they do not and will not. Not defending them.
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andyp
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Post by andyp on Dec 6, 2016 19:04:27 GMT
I think the only thing that could be considered groundbreaking (in FC terms anyway) is not specifically contained in the document. It is the fact that the 2% penalty will apply to all loans that go over term. Unless you were scouring the FC forums you wouldn't know it, but in the thread on the late Borehamwood loans thread they answered a question I had raised and confirmed the following...
Having banged on about this on their forum I am pleased that common sense is beginning to prevail. Hopefully this will act to make borrowers think more carefully about neglecting their contracted terms as well as rewarding lenders when they don't get paid on time.
In true FC manner though, the bit about updating existing late loan comments has not come to pass uniformly. I hold a Malvern loan which is 54 days late and has no comment about any additional 2%. I'm guessing there are probably others.
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blender
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Post by blender on Dec 6, 2016 19:49:20 GMT
I think the only thing that could be considered groundbreaking (in FC terms anyway) is not specifically contained in the document. It is the fact that the 2% penalty will apply to all loans that go over term. Unless you were scouring the FC forums you wouldn't know it, but in the thread on the late Borehamwood loans thread they answered a question I had raised and confirmed the following... Having banged on about this on their forum I am pleased that common sense is beginning to prevail. Hopefully this will act to make borrowers think more carefully about neglecting their contracted terms as well as rewarding lenders when they don't get paid on time. In true FC manner though, the bit about updating existing late loan comments has not come to pass uniformly. I hold a Malvern loan which is 54 days late and has no comment about any additional 2%. I'm guessing there are probably others. Generally agreed AndyP but it is not all loans it is property development loans. Commercial mortgages will not be included - but I wonder about 'short term loans', are they included?
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andyp
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Post by andyp on Dec 6, 2016 20:28:00 GMT
Agreed, I was taking that as read, given the title of the thread. As far as I'm aware it is all the interest only property loans and not commercial mortgages, which are treated like standard SME loans. They may mean something else, but FC's policy of using psychic transfer for such information means it is hard to be definitive.
Quite why it should be the likes of you, me and other forum users to extract and communicate this stuff is another matter. It is frankly a poor reflection on their communication team.
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blender
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Post by blender on Dec 6, 2016 23:27:49 GMT
Maybe they have not told all the relevant borrowers yet. It is a credit to you and a few others that FC have at last addressed the issue.
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metoo
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Post by metoo on Dec 7, 2016 0:47:02 GMT
Full credit indeed to those who campaigned patiently for so long on the official forum for late penalty interest to become the policy. It was loosely promised in loan Q&A answers back in 2015, but when over-runs became a regular thing the policy evaporated until the level of frustration was finally understood at last, coupled with some embarrassment that FC must feel over a few of the borrowers that seem to be taking the mickey. We have come a long way from earlier in the year when even the extension of standard interest was treated as a case-by-case issue. Penalty interest will be beneficial for FC because it concentrates the borrower's attention and feels fairer to lenders.
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