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  1. #31
    Squirrel Mortgages (Verified) JB@Squirrel's Avatar
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    Quote Originally Posted by unhuman View Post
    The interest rates and ease of set up are the main attractions for P2P.

    Website looks to be fixed now, placed an investment order for a secured loan. Lets see how long it takes to fill.

    Does anyone know if there ahs been any marketing by Squirrel?
    Hi unhuman,

    The borrower side is not an issue at all. We can dial that up and down almost at will. We're being careful to roughly match borrower and investor volumes. Borrowers typically need money fast and investors are slow to invest.

  2. #32
    Squirrel Mortgages (Verified) JB@Squirrel's Avatar
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    Quote Originally Posted by AppleCrumble View Post
    Is that fee not expensive? I mean what do the banks charge? I thought p2p was meant to be cheaper than banks? Or is it just easier to get the loan loan on p2p? As far as I recall the interest rates are lower with p2p than banks.
    Our fee is a flat $250 for unsecured, same as banks.

    Compare that to Harmoney who for a B5 grade loan charge 5.00% of the amount borrowed. On a $20,000 loan that would be $1,000. My view is that fees this high are a breach of CCCFA. Time will tell and it is being looked at by ComCom. Either way I think the fees are high, and in fact higher than even finance companies can legally charge.

    I think the real benefit of P2P is to be able to look a little bit more outside the box. There are plenty of good borrowers who don't tick all the bank boxes all of the time.

  3. #33
    Squirrel Mortgages (Verified) JB@Squirrel's Avatar
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    I'm back : ) Just had to make it a bit clearer who I am apparently. Anyway put up a small bio so you know a bit more about me.

    You'll have to jump back to page 2 to see my earlier posts which have made it back. I won't repeat here.

    So for those of you fascinated by our space you have some very different approaches in market and some fun times ahead trying to make sense of it all.

    Harmoney and LendMe are going down the U.S. approach of fractioning / market based approach which typically involves investment banks in the background. Will be interesting to see how LendMe goes without a bank lender behind them initially.

    We're going down the U.K. approach of reserving and we're taking it a step further. We are ruling out putting a bank behind the platform. We're confident that people centricity needs to be the driving force behind true disruption. Our approach wont be for those of you who like messing around in spreadsheets for fun but it will appeal to investors wanting it kept easy.

    Just remember this sector is in its infancy. As "big" as the sector is, it is tiny in the context of the industry. The consumer finance / high LVR market in NZ is $30 billion. Winners and losers wont be decided for a few years yet.

    So how we are different:

    1. We are going into this with the intent and goal of not losing 1 cent of investor money - ever. Rate Setter has achieved that in the UK using the same approach that we are taking. Our reputation will hang on our ability to manage the risk within the Reserve Fund and we will publicly disclose everything. That means our interests are aligned with investors and we will rigorously work on credit quality and arrears. In fact as we are seeding the Reserve Fund so we will lose our money first before an investor loses 1 cent. The more lending that is done the more seeding we need to do.

    ... Interestingly a by-product of this is we have no desire to grow too quickly. We are more interested in operational effectiveness and building scaleable systems and sustainable revenues.

    ... we will publicly report arrears from day-1 (none yet obviously.) I'm surprised that we have no public disclosure (that I'm aware of) in terms of Harmoney's credit performance. I only see anecdotal evidence from various investor portfolios and some of the loans that are trying to refinance through us at the moment. I'd like to see the industry provide transparency around credit performance and loss rates.

    2. Lower borrower fees. Everyone seems to be missing the 5.00% upfront fee (B grade loan) with Harmoney and it looks like LendMe is going down the same path. These are high fees relative to where the bank market is at. If you believe in arbitrage then surely it becomes obvious that the good quality lending gradually flows to the competitive end of the pricing spectrum. In my mind this type of pricing is not sustainable in the long-run if you want to play at the quality end of the market. How does this fit with CCCFA? Guess we'll find out eventually.

    3. Systems. You'll be please to know that if a borrower wants a top up we don't need to cancel the existing loan and penalise investors. Top ups are done as new loans - simple. We don't charge a percentage of the amount repaid and do a simple margin. If a loan does repay early we wont ping you with a big charge in fact there's no cost other than the inconvenience of having to reinvest. There's lots of other system differences that will become more obvious next year when we turn up the dial.


    What you'll start to see:

    We've got a lot more stats and better presentation of those statistics going into the platform over the next two weeks. We want to give more visibility to what's in the system. We recognise that we need to give more clarity around some aspects of the bidding process and the market loans available and bidding. A couple of the things we have to do (like give you the option to invest secured or unsecured) are quirks of the regulations we operate under. In a perfect world we'd be just doing bids and the marketplace loans wouldn't exist separately. We realise this is confusing.

    When there is more liquidity in the platform (and we make a couple more IT tweaks) we'll get this nailed down. We want to make investing as easy and seamless as possible.

    Next year .... secondary market, interest on the Call Account.

    Cheers, JB

  4. #34
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    Quote Originally Posted by boltonj1 View Post
    Hi Humvee,

    We know we still have a bit of work to tidy up the bidding process. Its mostly sorted now with some good changes going through this week. We're now focusing on getting more information to investors as they are bidding so they have good visibility of what is available in the platform. This will be up in the next two weeks.

    To be clear - we only fund loans in the platform when there is insufficient investor funds and we fund at the highest rate which is the upper end of the market price. We then pass those directly back to the market for investors to buy.

    In your case above you were still in this fractioning mindset. You put two separate orders in for $500. If there were two 2 year loan awaiting rates then this would have worked fine. But there wasn't.

    We'd already settled this loan at 9.00% and made it available back to the market. When we settle a loan and pass it back it needs to be funded in totality as we can't continue to split a loan in our system once it has settled.

    We know we need to continue to improve how we present this to avoid any confusion so any feedback is appreciated.

    Cheers, JB
    Hi JB

    Good to see you back.

    Just wondering why you have locked the maximum interest rate for new orders to 8% when the current average for 2year loans is 8.78% and even the 5 year average which has dropped quite a bit since the 8% cap was put in place is will at 8.08%. Previously you have indicated that bids can be up to o.5% ABOVE average.

    Combining this with the details of the loans you are offering back to the market would tend to indicate the maximum should currently be set to between 8.5%-9℅

    I would suggest the reason you are short of investors and needing to fund the loans yourself is because you are trying to drag the rates down below what investors are comftable with/expect.

    I like you do think that nz p2p interest rates will drop over time but I don't think dragging the market down kicking and screaming is the way to do it. Particularly given by the sounds of it you have plenty of borrowers and not enough investors.

  5. #35
    Squirrel Mortgages (Verified) JB@Squirrel's Avatar
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    Hi Humvee

    The $50 payments went through last night so have been honoured to everyone that invested over $1,000 in the platform of which there were a number. I'd have to check whether you're in there. Imagine not but happy to throw you the $50 given you did try as you say.

  6. #36
    Squirrel Mortgages (Verified) JB@Squirrel's Avatar
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    Humvee,

    There's no issue with the rate or return. In fact the feedback from investors generally is that the rates are too good to be true. There is over $60 billion of money sitting in retail banks at rates below 3.50%.

    The issue is generally apathy - no urgency and education. It will take a while for investors to grasp the Reserve Fund. The obvious inference at this stage is that $100k of reserves is not enough to cover the perceived risk. This will change over time as the reserves grow and we report around the level of arrears. At what level of Reserves do investors perceptions change - $500k? $1m? The point is, it is a number.

    There is no shortage of funds for 2 years. In fact we have over supply at that term. No borrowers there as most are going for 5 years and the average loan size is quite high. The 9% money that went out at 2 years was an outlier so misleading. Its why we had to charge the bidding process towards a moving average so we don't get wild swings in rates driven by small rouge bids whilst the platform is still young.

    The rate a borrower gets is dictated by the highest accepted bid rate. All investors in a loan get the same rate. For a $10k loan if $8,000 of funding was offered up at 7.50% and $2k was offered up at 8.50% then all investors get the 8.50%. In other words all investors get the benefit of the highest accepted rate.

    We don't allow different rates to exist on the same loan as this would get incredibly messy later on. The benefit is that we take a margin rather than a percentage of the repayment (which is computationally much harder to do) but investors don't get pinged on early repayments. Big issue for investors that most don't even realise happens on other platforms. It also means we can introduce a secondary market more easily.

    We are a platform. Our ethos is to create a people-centric platform that is safe and genuinely fair. The changes we are making to how the market rate is set was to eliminate excessive gaming when there is a lack of liquidity. That wont be for everyone on this forum where arbitrage is a sport. Over time, and reasonably quickly, it will deliver consistent reliable returns.

  7. #37
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    Quote Originally Posted by JB@Squirrel View Post
    Hi Humvee

    The $50 payments went through last night so have been honoured to everyone that invested over $1,000 in the platform of which there were a number. I'd have to check whether you're in there. Imagine not but happy to throw you the $50 given you did try as you say.
    Thanks - the $50 went through over night

  8. #38
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    A ShareTrader emailed me directly asking about the Reserving and how much of the Borrower Payment goes up to the Reserve Fun, so will briefly cover-off here.

    Roughly 3.50% of the rate (26% of gross interest) is paid from the borrower up to the Reserve Fund. Expected losses are dependent on risk grade but running at around 1.20% so we are reserving well above expected credit losses.

    For the first year we are maintaining the Fund at 4.00% to ensure it builds up to a respectable balance. If we get to $30m of lending then that will be $1.2m of reserves. Any losses in the first year we effectively take the hit on as we maintain it at 4.00%. After that the borrower contributions and low default rates will continue to grow the reserves on or around the 4.00% mark and that's the level we're targeting to keep reserves at. During periods of high growth particularly early on it might dip below this level and we'll also get some seasonal spikes with short-term arrears.

    If the Reserve Fund was depleted (obviously not expected) then we can solcialise any further losses by shaving the investor interest rate on all loans and diverting that up to the Reserve Fund.

    If we built up too much Reserves (exceed 4.00%) then we can lower the borrower credit spread. I'm inclined not to do that for a while as we want to be conservative leading into a possible marketing correction sometime in the next 2-3 years.

  9. #39
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    Quote Originally Posted by unhuman View Post
    The way I see it, spliting loans is not required as it doesn't matter which investor holds a loan gone bad as everyone else chips in to cover regardless of the size.

    eg there is no difference between me having a 10k loan go bad and splitting that orginal loan 5k each with someone else and it going bad. Everyone else still will be covering the loan payments via loan sheild.

    It's basically P2P socialism.
    Love that P2P socialism comment

    Capitalists would not be too impressed

    I have the feeling that corporates are hijacking P2P and that it has now a long away from the original concept of what P2P lending.was meant to stand for.
    Last edited by winner69; 03-12-2015 at 03:30 PM.
    “In a roaring bull market, knowledge is superfluous and experience is a handicap.”

    –Benjamin Graham”

  10. #40
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    I would like to deposit $100 a fortnight regularly into my squirrel account.
    Is this possible as it mentioned minimum $500.

    Also if I did these regular deposits how would I use the funds? Can I order and invest small amounts or would I need to wait and invest larger?

  11. #41
    Squirrel Mortgages (Verified) JB@Squirrel's Avatar
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    Quote Originally Posted by whitt View Post
    I would like to deposit $100 a fortnight regularly into my squirrel account.
    Is this possible as it mentioned minimum $500.

    Also if I did these regular deposits how would I use the funds? Can I order and invest small amounts or would I need to wait and invest larger?
    Hi Whitt,

    Our platform wont work that well for you just now. You don't earn interest when the money isn't invested and we have a minimum of $500 for term investments. Better to keep it in a bank Call Account and then transfer over larger amounts when you can.

    We're going to launch a few things early to mid next year.

    The first is we are going to put interest on money that is in bids put not yet invested. Investors should get some sort of return from the moment they commit funding and not have to wait until we lend it out.

    The second is that we will launch a Call Product for regular savers and those needing quicker access to their funds. Once we get this product sorted we can allow smaller transactions into it (like your suggestion.)

    Third is that we are introducing a Secondary Market. This is built and we are just waiting on getting an approval from the FMA next year and can then launch it. With the way we allow Investors to sell back to the platform we don't want millions on tiny loans clogging up the system hence have a $500 minimum.

  12. #42
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    I have an investment order 500$ sitting there at 9%.it seems I have to lower this to 8% to get it invested? When squirrel say 500$ min investment what do they mean exactly? Can I only provide 100% of the loan for 1 borrower,then the min investment will be whatever the min loan a browser wants?

    Have I got that right?

    Interesting re p2p socialism. If there is no defaults squirrel will do very well. If there is a lot of defaults,or it gets to a certain point,squirrel will start reducing the investors rate of return.don't think i'm a fan, but each to their own.

  13. #43
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    Hi AppleCrumble.

    Yes you may need to change your order to be within the market rates. At 5 year you can go up to 9% but 2 year is currently max 8%. There is currently a $30k loan awaiting funding at 5 years that you could bid 9.00% against.

    In terms of the Reserve Fund and P2P Socialism:

    First point is Squirrel does not financially benefit from the reserve fund. The Reserves never go back to Squirrel (other than the funds we have tipped in to seed the initial reserves.) The Reserves are held in Trust for investors.

    Second point is that if the Reserves were fully depleted then we replenish the Reserves by temporarily reducing the interest paid to investors. In essence this means that any excessive losses are socialised/borne across all lenders. This means investors don't need to be concerned with specific loan selection or even security and that investors are getting the full diversification benefit across the entire lending book. This is a protection mechanism for investors and purely for the benefit of investors. It is a very efficient way of reducing risk.

    Cheers, JB

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    Tks JB,

    I will look at cancelling my order and see if I can get in on the 5 year loan.

    What happens the money going towards the reserve fund when the reserve fund reaches 4% of the loan book? I was of the thinking it went to squirrel.

  15. #45
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    Quote Originally Posted by AppleCrumble View Post
    Tks JB,

    I will look at cancelling my order and see if I can get in on the 5 year loan.

    What happens the money going towards the reserve fund when the reserve fund reaches 4% of the loan book? I was of the thinking it went to squirrel.
    So, we've seeded the Reserve Fund with some initial money to get it started and we'll continue to top up the reserves to maintain it at 4.00% for the first year. We think we'll need to tip in around $400k. In the meanwhile obviously part of the borrower interest will be getting diverted to the reserve fund and continuing to build it up.

    After the first year, and only if reserves allow it, we can pull our seed money back out. (But only our seed money and only to the extent that reserves are over 4.00%.) Personally I don't think we'll be getting it out for a while as the growth rate in the book will mean we'll struggle to get over 4.00% after the first year.

    If, at some point in the future, we get to over 4.00% reserves then we'll just keep building it up. The more reserves for investor protection, the better! I don't imagine us ever getting to a point where we say that we have too much reserves.

    If we find that we are reserving too much then we'll tweak down the credit premium charged to borrowers and slightly lower the rate we reserve at.

    At no time does Squirrel ever have any rights over the Reserve Fund. If Squirrel Money was wound down then any residual reserves after all investors have been paid will be paid to charity which is currently Starship.

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