Derivex - interest free loans?
- Thread starter Lissy
- Start date
Hi forum posters and readers,
I have found the forum discussion of the Derivex proposed product very absorbing and am avidly waiting for the next episode. Initially I was disappointed with the forums lack of critique for the new product offering. However TJAMESX, nat r and Steve Navra have offered some insights into the business of raising capital for on lending to property investors.
My reason for posting is to encourage the ongoing critique of products such as Derivex, as this is great service for property investors.
I appreciate Steve Navra’s caution in withholding judgement, and that this product should not be dismissed just yet, as it may possibly be a feasible product, based upon his knowledge of the USA financial markets.
However, I do think we should analyse posts to the forum such as that given by Trevor Cohen, on the merits as posted, not on future assurances. In this regards TJAMESX and NAT R have done an excellent job in analysing Cohen’s sales marketing pitch, as it is presented with all its obvious obfuscation and intent to sound technical with pseudo financial statements that baffle the reader and reason.
The opinions such that we don’t query where other lenders raise capital, so why should we be so concerned with Derivex’s capital raising methodology are not valid. The established lenders have overall credence with established track records, even thou we may object to some aspects of the services they provide. Their basic methodology is understandable in that they use deposits or borrow money via the financial markets, and on sell at higher interest rates/margin. Derivex is a completely new Australian player in the market, where every aspect of the company and product should be considered. Derivex has the appearance of an Internet based start up company (doubtful assets), with a moneymaking concept, but obscure and questionable methodology.
I have found the forum discussion of the Derivex proposed product very absorbing and am avidly waiting for the next episode. Initially I was disappointed with the forums lack of critique for the new product offering. However TJAMESX, nat r and Steve Navra have offered some insights into the business of raising capital for on lending to property investors.
My reason for posting is to encourage the ongoing critique of products such as Derivex, as this is great service for property investors.
I appreciate Steve Navra’s caution in withholding judgement, and that this product should not be dismissed just yet, as it may possibly be a feasible product, based upon his knowledge of the USA financial markets.
However, I do think we should analyse posts to the forum such as that given by Trevor Cohen, on the merits as posted, not on future assurances. In this regards TJAMESX and NAT R have done an excellent job in analysing Cohen’s sales marketing pitch, as it is presented with all its obvious obfuscation and intent to sound technical with pseudo financial statements that baffle the reader and reason.
The opinions such that we don’t query where other lenders raise capital, so why should we be so concerned with Derivex’s capital raising methodology are not valid. The established lenders have overall credence with established track records, even thou we may object to some aspects of the services they provide. Their basic methodology is understandable in that they use deposits or borrow money via the financial markets, and on sell at higher interest rates/margin. Derivex is a completely new Australian player in the market, where every aspect of the company and product should be considered. Derivex has the appearance of an Internet based start up company (doubtful assets), with a moneymaking concept, but obscure and questionable methodology.
Hi Steve and all.Steve Navra said:Hi All,
One of the most wonderful aspects of this forum is the array of experience that the members share amongst themselves. Opinions abound, both optimistically hopeful as well as conservatively reserved.
I think it is time for us to portray a degree of tolerance towards the Derivex people:
1) The product, if valid might well represent a new and valuable financing opportunity for all of us.
2) Our own due diligence WILL TEST the validity of what is being presented.
3) I respect the 'intellectual property' aspect of how this structure might work as well as the mathematical modeling that might have gone into making the structure possible.
4) The group seems to infer that there is adequate protection for the borrower, this remains to be tested. (Until then, let's give the group the opportunity to fully present their case.)
5) The question of how the group are able to run a profitable business out of this structure; aside from us wanting to know if it is ethical, is really of no consequence to the borrowers. (After all, we do not ask mainstream lenders what their modus operandi is.)
6) The "acid test" will be in the final disclosure documentation. I think we ought to wait for Derivex to provide their full 'Product Disclosure Statement' (PDS) before we hastily and perhaps harshly jump to any conclusions.
I'm in WAIT and SEE mode.
Regards,
Steve
Steve, could you please do us the favour of (sure you were going to anyway), once you have read all relevant documents and PDS etc, relaying your thoughts to us here on the forum. You have the ability to breakdown the jargon and put it in terminology that most can understand.
Regards
Marty
kissfan said:
Yes certainly will
Note that I am just as interested as anyone else . . . this (IF VALID) could be a great product.
I am known to be a discerning sceptic; so will wait for the PDS BEFORE commenting. I encourage Trevor Cohen to supply the relevent documentation when he feels it is appropriate to do so.
Regards,
Steve
derivex and Interest free HomeLoan
hi all,
well I have been away from this for awhile and it has taken on a life of its own in that time. I am surprised at some of the comments and claims without having all the information from a group of people whom I assumed were open minded and had an entrepreneur streak in them.
I am progressing with my application and will let people know how it all goes, I dont have all the information yet and would expect to see all the ins and outs in the contract which I will read and have my lawyer read before signing and sending back.
Really at the end of the day, it is the contract and what is written in it that counts, nothing else. I don't understand the "con" comments etc as in my experience these types of schemes start with spam emails or cold phone calls in the main, I suspect some members of this forum have read this discussion and then "invited" Derivex to join/comment. On that basis I think questions to understand and probe are fine but to make claims that may/may not but true and we won't know until all the documentation is out and people have seen a contract that has been given to them is unreasonable.
So continue the thread, I shall comment more as my loan progresses but the money won't be available until the endish of January as I have said that is when I was told was the first time to the market. Personally if you are paying off your home loan then this is probably the one!! as long as it all stacks up and we shall know that when I settle.
I don't see this as a product for everything but it will certainly be a valuable option in your armoury when looking at "cash flow positive" property..
regards
Norman
hi all,
well I have been away from this for awhile and it has taken on a life of its own in that time.
I am surprised at some of the comments and claims without having all the information from a group of people whom I assumed were open minded and had an entrepreneur streak in them.I am progressing with my application and will let people know how it all goes, I dont have all the information yet and would expect to see all the ins and outs in the contract which I will read and have my lawyer read before signing and sending back.
Really at the end of the day, it is the contract and what is written in it that counts, nothing else. I don't understand the "con" comments etc as in my experience these types of schemes start with spam emails or cold phone calls in the main, I suspect some members of this forum have read this discussion and then "invited" Derivex to join/comment. On that basis I think questions to understand and probe are fine but to make claims that may/may not but true and we won't know until all the documentation is out and people have seen a contract that has been given to them is unreasonable.
So continue the thread, I shall comment more as my loan progresses but the money won't be available until the endish of January as I have said that is when I was told was the first time to the market. Personally if you are paying off your home loan then this is probably the one!! as long as it all stacks up and we shall know that when I settle.
I don't see this as a product for everything but it will certainly be a valuable option in your armoury when looking at "cash flow positive" property..
regards
Norman
Low Doc as well
I sent in a question asking Trevor if Low Doc loans will be available and this is the reponse.....
" yes, on the basis of individual assessment they will be subject to a term reduction ie may be assessed at 17 years in lieu of 20 this is how we adjust for risk as we do not have an interest rate to increase"
looking better all the time !
House Proud
I sent in a question asking Trevor if Low Doc loans will be available and this is the reponse....." yes, on the basis of individual assessment they will be subject to a term reduction ie may be assessed at 17 years in lieu of 20 this is how we adjust for risk as we do not have an interest rate to increase"
looking better all the time !
House Proud
Reserve Bank has no monetary policy control
May i ask a silly question.
If this product is true and becomes widely used - does this mean the Reserve Bank has no monetary policy control over the economy if interest rates become irrelevant?
Could the government legislate this product out of existence if that becomes the case?
May i ask a silly question.
If this product is true and becomes widely used - does this mean the Reserve Bank has no monetary policy control over the economy if interest rates become irrelevant?
Could the government legislate this product out of existence if that becomes the case?
toony said:
Toony hi,
I don't think it a silly Q but I also don't see this replacing Interest, note the security is only "good quality" residential property and there is no business loans or commercial loans available. Also as the "Quality of the security goes down then the "term" of the Principle Loan is reduced, this pushes up the repayments effectively reducing the Derivex risk/exposure - a bit like charging more interest
. So at some point the person concerned may wish to extend over periods that are not available to them without getting a P&I. Also there are times when I might want for some reason to have a tax deduction and hence have the tax payer pay 25% of my investment (I am on top margin ) so I still see a place for this loan as P&I as IONorman
Here's two BBC article's that seem to make Islamic (no interest) mortgages clear:
http://news.bbc.co.uk/2/hi/business/2525635.stm
http://news.bbc.co.uk/1/hi/business/1826834.stm
They seem to have very little to do with paying no interest, more to do with the bank buying the house & slowly selling it to the borrower via a 'rental' agreement.
At the end of the day, the bank still gets it's interest.
Here's another lengthier explanation which also includes the downside:
http://www.accommodation.police.uk/31.html
http://news.bbc.co.uk/2/hi/business/2525635.stm
http://news.bbc.co.uk/1/hi/business/1826834.stm
They seem to have very little to do with paying no interest, more to do with the bank buying the house & slowly selling it to the borrower via a 'rental' agreement.
At the end of the day, the bank still gets it's interest.
Here's another lengthier explanation which also includes the downside:
http://www.accommodation.police.uk/31.html
borrower financial and legal protection is the key
Gosh...I had to print this out to read it on the train this morning. Even then, I read most of the thread twice before coming to a conclusion.
I'm going to keep an open mind on this for the time being. This is extremely interesting and I'm hoping this is a great way to take even more time off repaying (almost) the PPoR.
NormH, I'll have to disagree with your assertion that "entrepreneurially minded people" would jump at something like this. I would hope entrepreneurially-minded people are conservative when it comes to Money. Especially looking at Buffet's classic definition of investment....that you get back more than you put in. And for what is still a conservative asset class like property, that rule applies very much. But like you said, you're the guinea pig. So thanks for giving us the blow-by-blow on the forum.
For me, the most important aspect is the risk to the borrower if Derivex goes bankrupt or having cashflow problems. Does the consumer credit code provide protection against arbitrary "calling" of a loan? Or do we have to rely on the good intentions of Trevor and co.? Does a contract really provide that kind of protection?
In a way, we're almost a focus group for Trevor's marketing campaign. If he can explain it to this forum, he'll stand a better chance of convincing, not-so-saavy homeowners/investors that this is a (potentially) fantastic way of owning your property more quickly.
IMO, I think it would be even easier concept to sell if they just said low-interest, like 2%. There's comfort level for joe public in seeing an interest rate. It reduces the "too-good-to-be-true" factor. It would also improves the cashflow for the company and would make me more comfortable about longevity of the business model. To me, "risk" is a very technical term that can mean many different things. I'm sure they're very good at measuring and quantifying risk, I just find it hard to believe they have found a solid way to reduce all the risk through the entire model to zero. The cashflow part of it with CMTs and BBSW rates still don't stack up.
The patent part of the business model is interesting. I'm not a lawyer, but patents are essentially a legislated agreement between governments and private individuals where the individual releases a "great idea" into the public domain and the government provides protection on those ideas for a fixed time. Usually 20 years. The details may vary from country to country, but that's the idea. If these guys have patents, then they should be listed somewhere and publicly available.
I only found out a year ago that a business process could be patentable. But it's true. Now I don't know what part of their business process or business model is patented, but I would discount the glamour of the patent and just interpret it as proof that these guys are brighter than your average bear. Of course, they could be very clever scamsters...
I liked Trevor's long answer. It removes my concerns about a scam. it's too complicated to be a scam. Now the real question is "is the business model sustainable and is the risk built on too many layers of leverage?"
But I've got a new question. In the TTRTR's web links about the Shariah banking system, the banks give the money for the property, but they seem to load the interest cost on top of the cost of the property. Then the borrower ends up paying the new price. I don't know what the new price is, but it's probably similar to what a regular P&I mortgage costs in the end. 2-3x more than the actual price. In Derivex case, the borrower doesn't pay all that out. Derivex takes the risk. Why take on all the risk when you can offer another Shariah compliant product like the other banks and get the borrower to pay the money plus the interest on top? From Derivex's point of view, it just seems like an awful lot of work to make essentially the same money.
I have so many other questions, but I think I'll just stop now.
Jireh
Gosh...I had to print this out to read it on the train this morning. Even then, I read most of the thread twice before coming to a conclusion.
I'm going to keep an open mind on this for the time being. This is extremely interesting and I'm hoping this is a great way to take even more time off repaying (almost) the PPoR.
NormH, I'll have to disagree with your assertion that "entrepreneurially minded people" would jump at something like this. I would hope entrepreneurially-minded people are conservative when it comes to Money. Especially looking at Buffet's classic definition of investment....that you get back more than you put in. And for what is still a conservative asset class like property, that rule applies very much. But like you said, you're the guinea pig. So thanks for giving us the blow-by-blow on the forum.
For me, the most important aspect is the risk to the borrower if Derivex goes bankrupt or having cashflow problems. Does the consumer credit code provide protection against arbitrary "calling" of a loan? Or do we have to rely on the good intentions of Trevor and co.? Does a contract really provide that kind of protection?
In a way, we're almost a focus group for Trevor's marketing campaign. If he can explain it to this forum, he'll stand a better chance of convincing, not-so-saavy homeowners/investors that this is a (potentially) fantastic way of owning your property more quickly.
IMO, I think it would be even easier concept to sell if they just said low-interest, like 2%. There's comfort level for joe public in seeing an interest rate. It reduces the "too-good-to-be-true" factor. It would also improves the cashflow for the company and would make me more comfortable about longevity of the business model. To me, "risk" is a very technical term that can mean many different things. I'm sure they're very good at measuring and quantifying risk, I just find it hard to believe they have found a solid way to reduce all the risk through the entire model to zero. The cashflow part of it with CMTs and BBSW rates still don't stack up.
The patent part of the business model is interesting. I'm not a lawyer, but patents are essentially a legislated agreement between governments and private individuals where the individual releases a "great idea" into the public domain and the government provides protection on those ideas for a fixed time. Usually 20 years. The details may vary from country to country, but that's the idea. If these guys have patents, then they should be listed somewhere and publicly available.
I only found out a year ago that a business process could be patentable. But it's true. Now I don't know what part of their business process or business model is patented, but I would discount the glamour of the patent and just interpret it as proof that these guys are brighter than your average bear. Of course, they could be very clever scamsters...
I liked Trevor's long answer. It removes my concerns about a scam. it's too complicated to be a scam. Now the real question is "is the business model sustainable and is the risk built on too many layers of leverage?"
But I've got a new question. In the TTRTR's web links about the Shariah banking system, the banks give the money for the property, but they seem to load the interest cost on top of the cost of the property. Then the borrower ends up paying the new price. I don't know what the new price is, but it's probably similar to what a regular P&I mortgage costs in the end. 2-3x more than the actual price. In Derivex case, the borrower doesn't pay all that out. Derivex takes the risk. Why take on all the risk when you can offer another Shariah compliant product like the other banks and get the borrower to pay the money plus the interest on top? From Derivex's point of view, it just seems like an awful lot of work to make essentially the same money.
I have so many other questions, but I think I'll just stop now.
Jireh
Islam forbids the increase or adding to the agreed value.... This is interpreted in many ways... One of which is regarding to interest.
There are Banks out there, but I'm not sure how they get around this issue..... Probably in the way that Jireh mentioned..... i.e. calculate the entire value with interest..... then the customer can repay the loan......
Makes life interesting !!!
Well, I know I've already said this, but lets wait with an open mind..... there is obviously product documentation that still needs to be supplied, and, I would assume some sort of OK from ASIC on what they intend to do..... as well as Financial Services licences....
It sounds like that are getting ready, so, lets give em time to show to us this can ( hopefully ) work.....
There are Banks out there, but I'm not sure how they get around this issue..... Probably in the way that Jireh mentioned..... i.e. calculate the entire value with interest..... then the customer can repay the loan......
Makes life interesting !!!
Well, I know I've already said this, but lets wait with an open mind..... there is obviously product documentation that still needs to be supplied, and, I would assume some sort of OK from ASIC on what they intend to do..... as well as Financial Services licences....
It sounds like that are getting ready, so, lets give em time to show to us this can ( hopefully ) work.....
Interesting angleFreeatlast said:
The theoritical economists on the forum don't see it my way but the world is awash with freshly printed money (the ink is still wet on the dollars the Yanks buy their oil with) and all this money needs a home. The $A seems a safe haven with the US$ in decline, so is the interest more "return of capital" than "return on capital"?Just thinkin' ...... Thommo
Thommo,
Yep, well you have brought up an interesting point..... Money is really only numbers sitting in a computer account..... what is to stop a government from "making" more money ???
Return of capital... yes I think so.... a bit like the car loan I was given in Singapore recently... the whole amount was calculated in it's entirety, then divided annually to provide a fixed repayment amount till the end of time...... so, theoretically I don't pay interest in an islamic sense of the word....
There has been some discussion recently about whether the issue of interest is really a problem with Islam..... it's the same ol thing... the Quran can be interpreted in many ways, much the same as other religions..... But, be damned if you are the first to re-interpret !!!
If the US$ does decline I for one will be happy, but for different reasons..... I'm tired of the USA being the centre of the universe....
Cheers
Scott
Yep, well you have brought up an interesting point..... Money is really only numbers sitting in a computer account..... what is to stop a government from "making" more money ???
Return of capital... yes I think so.... a bit like the car loan I was given in Singapore recently... the whole amount was calculated in it's entirety, then divided annually to provide a fixed repayment amount till the end of time...... so, theoretically I don't pay interest in an islamic sense of the word....
There has been some discussion recently about whether the issue of interest is really a problem with Islam..... it's the same ol thing... the Quran can be interpreted in many ways, much the same as other religions..... But, be damned if you are the first to re-interpret !!!
If the US$ does decline I for one will be happy, but for different reasons..... I'm tired of the USA being the centre of the universe....
Cheers
Scott
Fellas...if you recall Pauline Hanson mentioned the idea of governments 'just printing more money' and every newspaper, comentator and economist laughed at her so hard and suggested that she go back and do year 8 economics again.
I suggest you do some own study on monetary base etc before you fire off responses like you have ....it will make you look a lot sharper.
I suggest you do some own study on monetary base etc before you fire off responses like you have ....it will make you look a lot sharper.
Thommo
Congratulations Thommo u have hit the jackpot - only three people have done it in the last 4 years - and they work for us - no-one ouside the "Loop" has done it more lucidly or in simpler terms
The funding system revolves on a "circular guaranteed return OF capital" not
a return on capital.
The repayments are guaranteed to flow back to the borrower on a "circular guaranteed basis" ( AAA local registered public trustee overseeing and responsible for securing the funds in the interim ie the 20 year loan term ).
You may go to local S&P site the highest rated ADIs ie licenced banks in AU are AA- ie Big 4 graduating down to bb- etc smaller local regionals
The Trustee is bound by the terms of a funding and lending deed and their rersponsibilities to act on behalf of the Deeds beneficiaries ie the borrowers.
As geofm asked for earlier we do have it in a Flow Chart format if u guys would like to preview it also is in the form of a PPS Powerpoint Slide Show with the Flow Chart painting on screen in the exact order of funding process execution.
Just email me your personal email address and I will have the "Showtime" pack emailed back immediately.
Then feel free to call or message me and I will explain the "Showtime Presentation " in detail for you.
if u can do the same NAT have a look at the profitability slides involved in the capital reserving process - all of your critiques have been of great interest as NAT comes closest to my original attitude to developing a zero rate product yeah sure it defies all current economic logic - out funding system slots in beautifully with current reserve banking principals worldwide and the new three tier risk management procedures being thust on the global banking system by BASEL 11. Just reverse your thought processes from "return on capital to return of capital under guarantee"
You will see we lend against AAA secured cash security we have generated NOT PROPERTY and not MORTGAGES via mortgae backed securitisation processes
Nat u will see why we lend Interest Free - we make 350%+ more than a bank on exactly the same loan for the same amount with zero risk ... scary isnt it .... but we have committed and are bound under Deed to putting 5% of all profits back into local communities and worhwhile charitable endeavours via The Derivex Foundation in Australia ... the Trustee allocates these funds directly to the foundation.
Perhaps u can then update your discussion threads because as much as i would like to chat with all i am severely restricted timewise.
Some Background for weeks ahead;
Dec 6 -13
Tender process commences for
1."National Funding Licence"
2."National Lending Marketing Licence"
3."National Registered Public Trustee Company"
Process for 1 & 2 in AU includes
1. Must hold Australian Financial Services Licence
2. Will be bound by restrictive covenants and Licencing Deeds
Willl see advertised in Australian Financial Review and The Australian next week.
The Interest Free product line is being launched in Australia from 13/12/04 and simultaneously in NZ, Europe and the Americas on the 17/01/05.
Thommo let me know where u are - and if u are available - we would like to fly and accomodate u in Sydney so u can attend the "Showtime" launch on Friday December 17. Well done mate ....
Congratulations Thommo u have hit the jackpot - only three people have done it in the last 4 years - and they work for us - no-one ouside the "Loop" has done it more lucidly or in simpler terms
The funding system revolves on a "circular guaranteed return OF capital" not
a return on capital.
The repayments are guaranteed to flow back to the borrower on a "circular guaranteed basis" ( AAA local registered public trustee overseeing and responsible for securing the funds in the interim ie the 20 year loan term ).
You may go to local S&P site the highest rated ADIs ie licenced banks in AU are AA- ie Big 4 graduating down to bb- etc smaller local regionals
The Trustee is bound by the terms of a funding and lending deed and their rersponsibilities to act on behalf of the Deeds beneficiaries ie the borrowers.
As geofm asked for earlier we do have it in a Flow Chart format if u guys would like to preview it also is in the form of a PPS Powerpoint Slide Show with the Flow Chart painting on screen in the exact order of funding process execution.
Just email me your personal email address and I will have the "Showtime" pack emailed back immediately.
Then feel free to call or message me and I will explain the "Showtime Presentation " in detail for you.
if u can do the same NAT have a look at the profitability slides involved in the capital reserving process - all of your critiques have been of great interest as NAT comes closest to my original attitude to developing a zero rate product yeah sure it defies all current economic logic - out funding system slots in beautifully with current reserve banking principals worldwide and the new three tier risk management procedures being thust on the global banking system by BASEL 11. Just reverse your thought processes from "return on capital to return of capital under guarantee"
You will see we lend against AAA secured cash security we have generated NOT PROPERTY and not MORTGAGES via mortgae backed securitisation processes
Nat u will see why we lend Interest Free - we make 350%+ more than a bank on exactly the same loan for the same amount with zero risk ... scary isnt it .... but we have committed and are bound under Deed to putting 5% of all profits back into local communities and worhwhile charitable endeavours via The Derivex Foundation in Australia ... the Trustee allocates these funds directly to the foundation.
Perhaps u can then update your discussion threads because as much as i would like to chat with all i am severely restricted timewise.
Some Background for weeks ahead;
Dec 6 -13
Tender process commences for
1."National Funding Licence"
2."National Lending Marketing Licence"
3."National Registered Public Trustee Company"
Process for 1 & 2 in AU includes
1. Must hold Australian Financial Services Licence
2. Will be bound by restrictive covenants and Licencing Deeds
Willl see advertised in Australian Financial Review and The Australian next week.
The Interest Free product line is being launched in Australia from 13/12/04 and simultaneously in NZ, Europe and the Americas on the 17/01/05.
Thommo let me know where u are - and if u are available - we would like to fly and accomodate u in Sydney so u can attend the "Showtime" launch on Friday December 17. Well done mate ....
Derivex said:
Kewl,
And Thommo, you can come and visit me in Nth Sydney at the same time!!
Regards,
Steve
My take on it is (look at worst case scenario as a borrower):
1. Only borrow maximum 80% (include the 5% conduit fee in this 80% loan).
2. If Derivex go bust simply refinance with a bank (assuming this is not a wrap deal in Victoria)
In comparison with my current interest only loan I would be much better off assuming they don't go bust within 1 year. If Derivex make it to 5 years I would have around 20% extra equity (assuming the loss of the conduit fee and no housing growth or drop in house prices).
I too think their "model" could come unstuck (as all great computer models do!) but as long as they make it past 1 year I'll be happy. If they make it to 5 years I'll be ecstatic but I'm going into this loan with my eyes wide open assuming that they will go bust and thus I know the worst case scenario from the start.
I'm willing to take the gamble that they will last longer than 1 year and have sent in my application form with the application fee. This is a personal choice though and I suggest that nobody should finance at 100% of valuation (just to be safe).
1. Only borrow maximum 80% (include the 5% conduit fee in this 80% loan).
2. If Derivex go bust simply refinance with a bank (assuming this is not a wrap deal in Victoria)
In comparison with my current interest only loan I would be much better off assuming they don't go bust within 1 year. If Derivex make it to 5 years I would have around 20% extra equity (assuming the loss of the conduit fee and no housing growth or drop in house prices).
I too think their "model" could come unstuck (as all great computer models do!) but as long as they make it past 1 year I'll be happy. If they make it to 5 years I'll be ecstatic but I'm going into this loan with my eyes wide open assuming that they will go bust and thus I know the worst case scenario from the start.
I'm willing to take the gamble that they will last longer than 1 year and have sent in my application form with the application fee. This is a personal choice though and I suggest that nobody should finance at 100% of valuation (just to be safe).
Quote "The repayments are guaranteed to flow back to the borrower on a "circular guaranteed basis" ( AAA local registered public trustee overseeing and responsible for securing the funds in the interim ie the 20 year loan term )."
...mate you know as well as I do that the rating of the Trustee is meaningless and in fact they are not Rated ....the quality of the cashflows coming off the assets is what the rating agencies look at ...I do worry that you look to soak up implied credibility from sources where it is not relevant !!
Quote "The Trustee is bound by the terms of a funding and lending deed and their rersponsibilities to act on behalf of the Deeds beneficiaries ie the borrowers.".....likewise they are bound to act on behalf of the funders (those providing the wholesale money) and if they want to sell up then the trustee has to do so. A trustee acting in a responsoble manner only means they have to follow rules as set out in equity court,......it does not mean they won't sell up on a borrower.
Quote "our funding system slots in beautifully with current reserve banking principals worldwide and the new three tier risk management procedures being thust on the global banking system by BASEL 11."
..........Basel II only applies to banks (it hasn't come in yet)...you are not a bank so I fail to see the relevance.
"Return of capital" ...if I put $10 under my bed I will get it back (unless the dog eats it) ....the whole world is chasing yield on their money ....just looking to return the original amount invested is not a great story. Goverment risk in your home currency is 'risk free' ...in Aust you can buy a Goverment bond in A$ that will yield 5%....this is what is called the 'risk free rate'...anything under this rate will not attract investors no matter how safe you say it is.
...mate you know as well as I do that the rating of the Trustee is meaningless and in fact they are not Rated ....the quality of the cashflows coming off the assets is what the rating agencies look at ...I do worry that you look to soak up implied credibility from sources where it is not relevant !!
Quote "The Trustee is bound by the terms of a funding and lending deed and their rersponsibilities to act on behalf of the Deeds beneficiaries ie the borrowers.".....likewise they are bound to act on behalf of the funders (those providing the wholesale money) and if they want to sell up then the trustee has to do so. A trustee acting in a responsoble manner only means they have to follow rules as set out in equity court,......it does not mean they won't sell up on a borrower.
Quote "our funding system slots in beautifully with current reserve banking principals worldwide and the new three tier risk management procedures being thust on the global banking system by BASEL 11."
..........Basel II only applies to banks (it hasn't come in yet)...you are not a bank so I fail to see the relevance.
"Return of capital" ...if I put $10 under my bed I will get it back (unless the dog eats it) ....the whole world is chasing yield on their money ....just looking to return the original amount invested is not a great story. Goverment risk in your home currency is 'risk free' ...in Aust you can buy a Goverment bond in A$ that will yield 5%....this is what is called the 'risk free rate'...anything under this rate will not attract investors no matter how safe you say it is.
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Freeatlast said:
Inflation, and lots of it
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I held of posting until now - Id really like to have a better look at this indepth, I just dont have time atm.
Something to think about for now ...
If an annuity (aka Steve's cashbond) can increase your borrowing capacity by including the a capital income component then why cant a similar system work for a third party?
As with the annuity as long as your return on investment (ie return on the increased borrowing capacity) is greater than your expenses your infront - now add a few zero's and you've got a system that could work in a commercial environment.
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