Financing and repossession

[Carlobrand]

This seems like as good a place for the thread as any.

In the past, we've discussed the issue of banks putting millions into shipping ventures that just might fail, the potential for shipbuyers to skip, the risks to the banks' investments and so forth. Some thoughts:

By longstanding canon, from Book 1 through MegaTrav (and Gurps? I don't have that book), merchant captains have a chance of retiring with a ship - and a debt. Takes a minimum of 4 terms to reach captain (with a whole lot of luck), typically more with no guarantee of getting there. So, if you make captain, you have a minimum of seven and likely more chances to roll a 6 on 1d6 - a pretty good chance if you're determined, and more likely if you spend more time getting to captain and have more rolls to play with.

That's, at minimum, a MCr 7.416 investment, 20% of the cost of a free trader. How you come up with 7 million credits over a career is an interesting discussion all by itself but not the focus at the moment. Point is, Captain So-and-so has a 7 million credit investment.

So, comes the day, and things haven't worked out as well as the good captain would have hoped. He's behind in his payments, the bank wants the ship. So he ...

Runs? That's the common thought, makes a certain amount of sense for players who value their freedom of movement and need a platform to go from adventure to adventure. Canon odds are pretty stiff: "Ships which have skipped are subject to repossession attempts if detected by the authorities. Such attempts may range from the formal service of papers through legal injunctions to armed boarding parties. On each world landing, throw 12+ to avoid a repossession attempt; apply a DM of +1 per 5 parsecs distance from the ship's home planet, to a maximum of +9. If the ship has called on the same world twice within the last two months, apply a DM of -2."

However, does it make sense for the captain with a 7-million+ credit investment? Not stated in the rules (which give very little information about the repossession process), but common in law is the idea that the owner is entitled to his investment back, less arrears, the cost of the foreclosure/repossession action, depreciation and losses incurred in reselling the repossessed property, and so forth.

In a nutshell, while canon doesn't specifically speaks to it, there is strong logic in the bank kicking back a fair portion of that 7 million credit investment: it gives the unfortunate captain a strong incentive to play by the rules. So, he loses his ship and ends up with, say, 3 or 4 million credits, having lost half his investment and found himself "beached", but "beached" with enough money to either go where he wants and retire in comfort or to begin investing and accumulating into the down payment for his next ship. Meanwhile, the bank gets the ship to resell, with the other 3 or 4 million credits covering the past due payments, legal costs covered, money for repair and reconditioning, and a hefty chunk of "penalties" to add to its profit margin. If the bank can get the captains to cooperate, they actually make more money more quickly by repossessing than by the loan itself. The older the ship, the larger the captain's investment, and the more money available to the bank to offset the ship's age and lower value - and the more money the captain gets back.

(Although, if the man's managed 10 or more years of steady payment, there's logic in extending a small short-term loan against his principal to bring the larger loan current, see him through the hard patch and help him become a steady payer again. Worst case, you end up owning more of his principal after repossession.)

I'm giving thought to allowing greater freedom to the player in choice of ship. So, for example, the far trader's something under twice the cost of a free trader: if he rolls a ship twice, he can take it as a far trader with a 40-year loan instead of the usual free trader with ten years of the loan paid off. Or, he can try his hand at design and order up a custom job - provided the custom job's design can make enough money to pay the loan. For that purpose, I'm assuming each roll of a ship is equivalent to MCr 7 toward a down payment. Allows for some tweaking.

I'm also wondering what mentions there are in canon about repossession. Like most folk, I've got my own house rules, but the body of canon's pretty large, there are many corners I don't know about. How patient are the banks?

 

[Limburger59]

JTAS #16 had an article titled "Giving the Bank a Fighting Chance" by Jolly Blackburn. I can't find my copy right now, but after reading it I recall thinking that it would be more profitable playing a repo man than a merchant.

 

[DangerousThing]

T5 has every ship share being equal to about 25 tons of ship. Anything not covered by this can be financed.

I like your way of thinking, because this would be easier on the banks and the borrowers.

IMTU I have every ship that has a loan send an I-am-here message to the bank when it gets within range of a starport. It's part of the transponder's function, and it is possible to override it, it is difficult.

In my currently starting campaign, the players will be on a subsidized ship. First a scout ship that's pimped out, then later a merchant pioneer ship. In both cases they get bonus points for good information on raiders (pirates, usually organized), destroying raiders, and some pieces of choice info the government wants (there should be a hidden Imperial site for mothballed naval ships which is the big prize, if they can find it and not get caught by the bad guys who own the territory the depot is in). This isn't in any way even close to OTO.

 

[Dragoner]

IMTU, at least in this cam, the factor would just hire bounty hunters to skip trace and take the ship back.

 

[CosmicGamer]

A similar topic comes up so much that I have addressed it in my personal Traveller document and I'll copy it yet again:

Whenever people start talking about crime and bounty hunters I feel the need to point out that traveling round trip to follow and track down someone and then return with them is not cheap. Also take into consideration that only sometimes is the bounty hunter successful so the successful bounties need to pay for all the expenses of "getting their man" and cover the cost of some failed attempts too.

To me, it's more likely bounty hunters don't go jumping around and just study all the "wanted posters" and hang out at their local star port looking for any matches. With the lag in obtaining information, it’s common to do a facial recognition search against archived data to check if anyone wanted passed through previously.

Some star ports will have facial recognition and other means for checking anybody coming and going against the latest database of wanted people.

While this addresses bounty hunters chasing after criminals, like murderers, I feel that it also is applicable to chasing after a ship. Yes, a ship is very valuable and worth retrieving. It is far cheaper to send a "wanted" notice out than chase after a ship. A notice can travel just as fast as the bounty hunter and can spread out in every direction.

Sure, a bounty hunter can think they have a hot lead that nobody else has and follow up on it.

Think about the best case: Mortgage payment is a week late. Lets say that there are no late payment notices or grace periods. Lets assume payment was made at a location where the mortgage company has offices and there are bounty hunters in system. You are already following a 5 week old trail at best.

 

[whartung]

In a nutshell, while canon doesn't specifically speaks to it, there is strong logic in the bank kicking back a fair portion of that 7 million credit investment: it gives the unfortunate captain a strong incentive to play by the rules. So, he loses his ship and ends up with, say, 3 or 4 million credits, having lost half his investment and found himself "beached", but "beached" with enough money to either go where he wants and retire in comfort or to begin investing and accumulating into the down payment for his next ship.

I'm just curious where you're driving this from. As I understand it, having been fortunate enough to not have had it happen to me, when I put money down on a house or car and then have it repossessed, I don't get my initial investment back. The whole point of the "down payment" (however acquired) is to lessen the risk of recovery for the asset that's backing the loan.

If the bank loans 80% for an asset, they have a solid chance of recovering that investment once they liquidate the asset after forfeiture. That down payment is lost by the original debtor.

Or am I missing something?

 

[SpaceBadger]

I'm just curious where you're driving this from. As I understand it, having been fortunate enough to not have had it happen to me, when I put money down on a house or car and then have it repossessed, I don't get my initial investment back. The whole point of the "down payment" (however acquired) is to lessen the risk of recovery for the asset that's backing the loan.

If the bank loans 80% for an asset, they have a solid chance of recovering that investment once they liquidate the asset after forfeiture. That down payment is lost by the original debtor.

Or am I missing something?

In the US at least, the bank that reposseses or forecloses on property is supposed to put it up for auction, and then if the auction price is greater than the debt owed, the difference goes back to the owner. In practice, the bank is usually the only bidder, and they never bid above the debt, so the owner gets nothing.

 

[Dragoner]

Who said people would be sent out? Hueristics work.

 

[sabredog]

Who said people would be sent out? Hueristics work.

They may work but where is the fun in that? Players like to be repo men - it is a good way to make a stake large enough to find yourself on the other end of the bank loan someday. And then those same players like dodging repo men - the whole process is a circle of Traveller life thing. The staple of many a quick game when the players are broke and the referee is tired.

 

[Dragoner]

They may work but where is the fun in that? Players like to be repo men - it is a good way to make a stake large enough to find yourself on the other end of the bank loan someday. And then those same players like dodging repo men - the whole process is a circle of Traveller life thing. The staple of many a quick game when the players are broke and the referee is tired.

It seems with the advent of computers, that rational thought is dying, heuristics is how brains work.

 

[sabredog]

Ah, I thought you were referring to some robotic bounty hunters with advanced A.I. being sent out.

 

[Dragoner]

Mine was a reply to the idea that bounty hunters wouldn't be used, or tracking a trail that is too old. Good investigators would be able to use an educated guess as to where a ship was headed, and at say a bounty of 5% of a multi-megacredit ship, there would be plenty of time to trace the ship. I would think that they would already be in system, watching a list of wanted ships, while cross referencing data from various ports.

You are right though, it is a perfect hook for an adventure: find the missing ship ...

 

[sabredog]

Speaking as a former private investigator who worked insurance fraud and skip-tracing contracts through the 80's before becoming a cop, I would hazard a guess that given how many traces people left to follow back then, and how much the numbers and types of trails have increased now with the Net, increased digital records, and all the data floating around, that finding a scent and following it would be even easier in the far future. Especially in the paperwork and bureaucracy-heavy vilani society being what it is you would be tripping on information.

Of course separating the wheat from the chaff would take effort, and depending on the age of the trail (given the nature of jump travel) there might only be scraps, but it could be done. The nature of jump travel and the ferocious fuel consumption of ships would help narrow the choices, too. Eventually you'd find your man.

 

[Dragoner]

So there will be a 57th century Peter Gunn watching the ship that are late on their payments or outright skipped, and if he sees something juicy, he calls his crew and goes after it.

Sounds like a great adventure.

 

[sabredog]

... and he'll have a suit of combat under that trenchcoat, a laser for a 'gat, but there'll still be a bottle of Black Jack stashed in a drawer on the bridge of his ship.

......He'll be sitting in his chair with his legs up on the desk resting his barking dogs when in walks this Dame, more of a "Dane" really, since she was a Vargr. But she was blonde and had legs that went all the way up to her pointed ears so she was still easy on the eyes. He tossed off the shot of Johnny Red and and watched her fold herself onto the couch he kept in the office to sleep on and for clients to sit on when they accidentally wandered in off the street when looking for the restroom. He made a mental note to get a new lint roller so he could get her fur off the upholstery later but smiled and said, "So, what sort of trouble are you in, sweetheart?" He checked the drawer to see if he had any biscuits left from the last case.....

 

[Carlobrand]

I'm just curious where you're driving this from. As I understand it, having been fortunate enough to not have had it happen to me, when I put money down on a house or car and then have it repossessed, I don't get my initial investment back. The whole point of the "down payment" (however acquired) is to lessen the risk of recovery for the asset that's backing the loan.

If the bank loans 80% for an asset, they have a solid chance of recovering that investment once they liquidate the asset after forfeiture. That down payment is lost by the original debtor.

Or am I missing something?

It's happened to me. Lost a house in foreclosure at the beginning of this economic mess. Well, technically speaking, I moved for financial reasons, couldn't keep up the house and take care of the family in the new place, had little choice but to let the bank have it. The paperwork that came across through the mess made it clear that the bank's only right was to its debt - and fees, and fees, and fees, and fees. And more fees. That last part is what pretty well eats up whatever equity exists, that and the fact that the bank's appraiser during foreclosure never seems to be as optimistic about the house's value as the appraiser used when you bought the place, and the fact that an auction crowd really isn't interested in paying top dollar. Still, you're entitled to any surviving portion of your equity once the dust settles - if there is any surviving portion after all the fees and such. The bank is very, very good at finding fees to charge. I was lucky not to end up still owing them money.

There's nothing stopping a TU bank from feeing a person's equity to death. There's nothing stopping the TU universe from having laws saying the bank gets it all if you default - it's an alien culture in the far future, doesn't have to be guided by U.S. precedent. However, from a pragmatic standpoint, there's a certain self-interest in the bank playing fair when the real property in question costs tens of millions of credits and can cover several parsecs in a few weeks to place itself in a region of space where the local governments are hostile to the Imperium and its businesses.

My way, the bank gets the ship to resell, and the past due payments, and a hefty chunk of fees to add to the win column all with the cooperation of the owner/operator, whereas the other way they might get more for each foreclosed ship, but seeing even one in ten skipping owners skip successfully would eliminate that extra profit. Mathematically, unless the odds of tracking down skips is very, very high, it pays to bring the fly back with honey instead of vinegar.

 

[Fritz_Brown]

I agree that it would be a supportable concept, Carlobrand.

As to getting to someplace hostile to the reach of the Imperium - that's hard to do in most of the Imperium, even at J3. Someplace like the Spinward Marches - much easier. In MTU, with it's much smaller polities and younger Tech, skip tracing becomes harder, yet potentially more profitable (IMO).

 

[whartung]

It's happened to me. Lost a house in foreclosure at the beginning of this economic mess. Well, technically speaking, I moved for financial reasons, couldn't keep up the house and take care of the family in the new place, had little choice but to let the bank have it. The paperwork that came across through the mess made it clear that the bank's only right was to its debt - and fees, and fees, and fees, and fees. And more fees. That last part is what pretty well eats up whatever equity exists, that and the fact that the bank's appraiser during foreclosure never seems to be as optimistic about the house's value as the appraiser used when you bought the place, and the fact that an auction crowd really isn't interested in paying top dollar. Still, you're entitled to any surviving portion of your equity once the dust settles - if there is any surviving portion after all the fees and such. The bank is very, very good at finding fees to charge. I was lucky not to end up still owing them money.

That makes sense (btw, I hope things are better for you and you're getting your head above water).

It also brings up an option that's not been put forth. Simply, the captain selling the ship. Selling it to get top dollar for it rather than bank repo auction prices. Ostensibly, since he already has some large share in the ship, he's not "underwater", but the ship can certainly depreciate over time.

Boy, you know you're talking Sci-Fi adventure role playing fun when you get to turn to page 437 to find the Starship Depreciation and Actuarial charts!

 

[copperhamster]

I have not run the numbers in the new version but the reason the Fat Trader was also known as the 'Subsidized Trader' in earlier versions of the game was that on pure freight and full passengers, after operating expenses, there was not enough gross profit to pay the monthly loan. So most of them operated on a subsidized contract where they pay a percentage of the profits, the Imperium pays the rest of the loan balance, and they are stuck on a small backwater route for most of their time. (The Traveller Adventure used just this model, and the ship had 'built up' like 24 months or so of 'off route' time.)

 

[Enoki]

Never reinvent the wheel. Take some pointers from the real thing:

http://press.discovery.com/emea/dsc/programs/airplane-repo/