Author Topic: Discounting Grace/Late Note  (Read 6574 times)

GS

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Discounting Grace/Late Note
« on: June 07, 2013, 10:02:54 PM »
I don't have any Late/Grace period notes, yet, but I know it's just a matter of time... my plan is to sell any note at the first sign of trouble.  What would be considered a good mark down for quick sale of a Grace Period note, or a 16-30 days late note?

According to LC stats, Grace period notes have an 81% percent chance of recovery, so would a 19% markdown be a good starting point?

Same for 16-30 days late notes.  Does a 56% chance of recovery mean a 44% markdown? 

core

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Re: Discounting Grace/Late Note
« Reply #1 on: June 07, 2013, 10:13:20 PM »
Here are my stats for in grace notes where there is not a BK or deceased individual:

Min:-56.06% Max:-3.32% Mean:-30.68% Median:-26.88% σ:14.64

So 19% sounds ok for a starting point.  Depends on the displayed FICO trend.   Problem is since your price is a bit on the high side, you may not sell it at 19% and the clock is really ticking on those (very few days left before it turns into Late) so you'll have to keep after it.
« Last Edit: June 07, 2013, 10:15:16 PM by core »

GS

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Re: Discounting Grace/Late Note
« Reply #2 on: June 07, 2013, 10:21:24 PM »
Thanks.  That is great info.  My priority would be selling quickly so 25 to 30 would be a better starting point.

core

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Re: Discounting Grace/Late Note
« Reply #3 on: June 07, 2013, 10:23:07 PM »
Does a 56% chance of recovery mean a 44% markdown?

I don't think the price should have anything to do with that figure they throw out.  Their definition of "recovery" is getting any money at all after the event, even a buck.  At least that's what I recall.  It's in the prospectus.  I definitely remember thinking it's absolutely meaningless for such purposes.

New Jersey Guy

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Re: Discounting Grace/Late Note
« Reply #4 on: June 07, 2013, 11:22:31 PM »
Watch for any type of contact with the borrower.  That's important.  Notes where some sort of contact was made or a "Promise to Pay" have a higher chance of recovery.  Your discount should be less.

Many Grace Period Notes will automatically get tagged with "Payment Plan".  If there is no contact with the customer, the Payment Plan isn't worth spit.  LC will try to collect again, usually 2 weeks past the payment date and call it a "Payment Plan".  If the payment fails again (like Core stated) the note goes 16-30 days late.  Many buyers don't realize this and get fooled into buying, thinking some sort of arrangement has been made. That's good for you.
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edward

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Re: Discounting Grace/Late Note
« Reply #5 on: June 07, 2013, 11:43:43 PM »
Thanks, NJ Guy for that important clarification. I had a note do just that and I assumed that Payment Plan meant..you know..a real plan arranged by LC and agreed to the borrower.

core

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Re: Discounting Grace/Late Note
« Reply #6 on: June 07, 2013, 11:53:50 PM »
Many Grace Period Notes will automatically get tagged with "Payment Plan".  If there is no contact with the customer, the Payment Plan isn't worth spit. 

I never thought about this possibly "fooling" people.  That's an interesting angle I may need to consider.  Keep in mind you can click on the payment plan link and get details on the dates.  I do not know what those dates show for these "fake" payment plans.  I would imagine there would be just one payment scheduled for the plan, and it would be a fixed number of days after the real one?

2nd point:  LC's customer service folks don't seem to always log stuff when they should.

And finally, a complaint:  Why can't they provide a brief summary of what was discussed, rather than "Contacted borrower"?  Some times this is logged on a pristine note when it was likely just a response to an innocent borrower question.  It hurts my note's value.

New Jersey Guy

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Re: Discounting Grace/Late Note
« Reply #7 on: June 08, 2013, 07:48:06 AM »
"Why can't they provide a brief summary of what was discussed, rather than "Contacted borrower"?"

One of the give-aways on payment plans is the amount they plan on deducting.  If you click on "Payment Plan" and they only show one date, and the amount is the same amount of their regular payment, it's no Payment Plan.  (Usually the amount is like 1 penny more)  You'll notice that the date is usually around 2-weeks past their due date.  Look at it like bouncing a check.  If it bounces, the bank will attempt to put it through a second time.

I guess summaries can't be discussed in the log due to privacy laws.  That sucks.  I bought a distressed note where there was several borrower contacts listed over a 10-day period.  That's a good sign.  The day after it settled I checked it again and the log read "Borrower provided Bankruptcy Information."  You just never know what was discussed.

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core

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Re: Discounting Grace/Late Note
« Reply #8 on: June 08, 2013, 08:35:08 AM »
several borrower contacts listed over a 10-day period.  That's a good sign.

Maybe it's not such a good sign. ;)

I guess summaries can't be discussed in the log due to privacy laws.

I'm not asking for anything that could even be construed that way.  All I'm asking is for maybe a selection from a dropdown like so:
- Advised borrower on requested early payoff options
- Borrower advised s/he may not have money for ACH until Monday.  Set up pmt plan.
- Borrower advised s/he may not have money for ACH until next month.  Set up pmt plan.
- Responded to borrower question about banking institution change
- Borrower does not have any money.  Poverty is irrelevant.  Resistance is futile.  Borrower will be assimilated.

It is absolutely NOT a privacy issue because we see the exact same information, for the most part (inferred), after it plays out 3-4 days later.  Not a privacy issue by a far stretch.  It's more like holding all the information until all the bets can be collected.  The race is already over.  Maybe they are doing some front-running.

Along those same lines, why wait so long to report failed ACH payments?  Those bounce quickly.  Doesn't it bother any of you that they just sit on their hands and not tell anyone until 5-7 days later when they know darn well it's already failed?

I tell you what, if I worked there I would be passing info to a "Big Better"  on the outside.  That's what we do in a casino.  The difference here is they are holding information.  At least a casino is fair.  If I lived in CA I'd apply for the janitor job there at their SF office.  Wow, can you imagine?  One sticky note password on a monitor of a CSR rep's desk, and I've got some capital tomorrow for sure.

They hide the 3 and 6 mo credit reports from us, even though the 0 mo ones are published.  Bounced checks are hidden until "They" are ready to show them.  Conversations are kept secret.  Who's really "in charge" here?  I thought this was our money at risk?
« Last Edit: June 08, 2013, 09:06:38 AM by core »

New Jersey Guy

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Re: Discounting Grace/Late Note
« Reply #9 on: June 08, 2013, 09:08:22 AM »
"Doesn't it bother any of you that they just sit on their hands and not tell anyone until 5-7 days later when they know darn well it's already failed?"

Yea, you gotta pretty much guess whether or not the payment is going through.  If no numbers appear 4-5 days into the processing period, it's a pretty good indication the payment failed.

What bothers me, though, is that after the payment fails, they don't bother to update the account.  They always leave a hole in the payment dates and it doesn't update for I-don't-know-how-long.

IE:  No notations for payment missed May 20th.  It's what today?  June 8th?
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core

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Re: Discounting Grace/Late Note
« Reply #10 on: June 08, 2013, 09:34:49 AM »
They always leave a hole in the payment dates and it doesn't update for I-don't-know-how-long.

Yeah, those holes in payment dates bothered me for months.  I gave up on a logical solution and had to come up with a kludge.  I don't like kludges.

I am honestly surprised there is not any resistance to this situation that they have left us with.  My post above was intended to incite a riot inspire courage, but it really doesn't matter:  If we all go away the institutional investors will just have more to grab after the Hog-Period elapses.  It doesn't matter to LC.  This is unfortunate.   I wonder if the institutional investors get the hidden data?

storm

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Re: Discounting Grace/Late Note
« Reply #11 on: June 19, 2013, 10:40:10 AM »
On grace notes, I start with 5% discount and reduce it by another 5% every day it doesn't sell.  Most of mine sell with 5%-10% discount and occasionally a 15%.  Notes that are worth more than $25 seem to require a bigger discount (10-15%) to sell.  I'm not sure if that is a quick enough sell for you.  Rarely do I let a note go late before I sell it, so I can't really say how much to discount them.  I invest in loans with interest > 12%, 0 inquiries, and mortgage holders only.

rawraw

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Re: Discounting Grace/Late Note
« Reply #12 on: June 19, 2013, 06:25:02 PM »
WHy don't we get LC on record about these issues?  Someone email away