Author Topic: Do some 100% funded notes fail to complete?  (Read 5052 times)

GeoUSA

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Do some 100% funded notes fail to complete?
« on: January 22, 2014, 03:05:44 PM »
Some notes I invested in moved to the "Issued and Current" status within a few days.  Others have remained in the "In Funding" status for more than a week even though they are 100% funded.  Does LC sometimes cancel a 100% funded note and put the funds back in investors' Available Cash?

In the LC Borrower forum there is a thread about LC requiring several levels of verification from the borrower afterwards such as requesting address verification with a utility statement, income verification, and bank account verification.  It is good to know LC is screening for potential fraud.  I am just curious how often others see LC cancel a 100% funded note and return the funds to investors.

rawraw

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Re: Do some 100% funded notes fail to complete?
« Reply #1 on: January 22, 2014, 05:09:53 PM »
Yes a lot are cancelled.

Rob L

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Re: Do some 100% funded notes fail to complete?
« Reply #2 on: January 22, 2014, 07:12:14 PM »
Happens all the time. Very common occurrence.
Bad news is that your money is tied up while LC completes vetting of the borrower.
Good news is that LC completes vetting of the borrower; otherwise who knows how high the charge off's would go.
I'm fine with complete vetting, though the wait can be frustrating.

Lovinglifestyle

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Re: Do some 100% funded notes fail to complete?
« Reply #3 on: January 22, 2014, 07:14:23 PM »
From 12-24-13 to 12-30-13 orders, 45 out of 90 (50%) were cancelled.  Nearly all of the 90 were EFG.
I count on needing to pick at least twice as many as I want to end up with.

Bohb Daishi

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Re: Do some 100% funded notes fail to complete?
« Reply #4 on: January 23, 2014, 01:43:28 AM »
Some notes I invested in moved to the "Issued and Current" status within a few days.  Others have remained in the "In Funding" status for more than a week even though they are 100% funded.  Does LC sometimes cancel a 100% funded note and put the funds back in investors' Available Cash?

The number floating around is that about 50% of new notes have their funding cancelled, for various reasons. The biggest complaint is that since LC ties up your cash, you are missing out on 1-2% interest each month.

I would recommend taking a look at the FolioFN market - there are over a hundred thousand notes for sale on there; many with substantial discounts.
There are three ways to make a living in this business: be first, be smarter, or cheat.

rawraw

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Re: Do some 100% funded notes fail to complete?
« Reply #5 on: January 23, 2014, 04:37:24 AM »
I think the 50% only applies to high grade notes.  My low grade notes go through much faster.

GeoUSA

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Re: Do some 100% funded notes fail to complete?
« Reply #6 on: January 23, 2014, 08:19:41 AM »
Late yesterday after starting this thread I had my first funds returned to Available Cash after a note failed to complete.  I have been investing in higher B's through G.  I agree it's a bummer to have the cash held up during the extra processing but losing a week of access to the cash rather than losing the entire amount is preferable.  Thanks for the responses.

BCD notes will be my primary investments going forwards.  I realize it will be 6 months to a year before I begin to see if my strategy produces a return.  It looks good on Nickel Steamroller.

Brian

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Re: Do some 100% funded notes fail to complete?
« Reply #7 on: January 23, 2014, 12:45:12 PM »
Some notes I invested in moved to the "Issued and Current" status within a few days.  Others have remained in the "In Funding" status for more than a week even though they are 100% funded.  Does LC sometimes cancel a 100% funded note and put the funds back in investors' Available Cash?

The number floating around is that about 50% of new notes have their funding cancelled, for various reasons. The biggest complaint is that since LC ties up your cash, you are missing out on 1-2% interest each month.

I would recommend taking a look at the FolioFN market - there are over a hundred thousand notes for sale on there; many with substantial discounts.
I second checking out the FolioFN market. Your money isn't tied up for nearly as long and you start earning interest right away.
The second half of Peer Social Lending
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RaymondG

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Re: Do some 100% funded notes fail to complete?
« Reply #8 on: January 24, 2014, 01:08:45 AM »
Some notes I invested in moved to the "Issued and Current" status within a few days.  Others have remained in the "In Funding" status for more than a week even though they are 100% funded.  Does LC sometimes cancel a 100% funded note and put the funds back in investors' Available Cash?

The number floating around is that about 50% of new notes have their funding cancelled, for various reasons. The biggest complaint is that since LC ties up your cash, you are missing out on 1-2% interest each month.

I would recommend taking a look at the FolioFN market - there are over a hundred thousand notes for sale on there; many with substantial discounts.
I second checking out the FolioFN market. Your money isn't tied up for nearly as long and you start earning interest right away.
But assuming the FolioFN market is somehow efficient, you paid premium above the loan's actual value.

core

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Re: Do some 100% funded notes fail to complete?
« Reply #9 on: January 24, 2014, 01:30:29 AM »
But assuming the FolioFN market is somehow efficient, you paid premium above the loan's actual value.

It's not efficient, and not even close.  There's always someone who wants out more than they want to extract every possible penny's worth from their notes, and a buyer is not there at the moment.  Besides, if you want to play that game (calling a discount a premium), then one could argue that you're paying a premium on some new originations as well.

Bohb Daishi

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Re: Do some 100% funded notes fail to complete?
« Reply #10 on: January 24, 2014, 03:18:36 AM »
But assuming the FolioFN market is somehow efficient, you paid premium above the loan's actual value.

It's not efficient, and not even close.  There's always someone who wants out more than they want to extract every possible penny's worth from their notes, and a buyer is not there at the moment.  Besides, if you want to play that game (calling a discount a premium), then one could argue that you're paying a premium on some new originations as well.

Not some, but most new originations. If you aren't purchasing your notes within 2 seconds of each feeding time, you are only getting the leftover scraps that nobody wants.
There are three ways to make a living in this business: be first, be smarter, or cheat.

Rob L

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Re: Do some 100% funded notes fail to complete?
« Reply #11 on: January 24, 2014, 11:24:24 AM »
I wonder what all the factors are that come into play after a loan is 100% funded, LC gives the final thumbs up/down, and the loan is issued.

The term, interest rate and probability of default are already set in stone by LC at "original listing" time, before the first dollar of the loan is funded.

Is LC's mission after the funding is completed simply to determine the veracity of the borrowers application? Probably, but ...
Assume the borrower has been completely truthful. Can additional truthful information acquired by LC lead the underwriter to conclude the loan is more or less risky than initially thought, the interest rate is off and the loan is a bad deal (for borrower or lender)? If so what if anything does LC do?

Of course a big reason 100% funded loans are not issued is that the borrower changes his/her mind.
I suppose many wait for a long time just to keep their options open, thus tying up investor money in the process.

core

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Re: Do some 100% funded notes fail to complete?
« Reply #12 on: January 24, 2014, 11:41:07 AM »
Assume the borrower has been completely truthful. Can additional truthful information acquired by LC lead the underwriter to conclude the loan is more or less risky than initially thought, the interest rate is off and the loan is a bad deal (for borrower or lender)? If so what if anything does LC do?

That's a darn good question.  They can't just adjust the rate on the already-funded loan.  And I hardly believe they'd cancel the entire deal and send it through the funding process again.  If I were in charge of such things, what I would do in a case like this would be to 'flash' it to the whole loan program at the adjusted rate and if anyone took it then the original one could be quietly canceled with nobody knowing any better.  If not, then it would probably just be let through.  There's no way they're going to give up their origination fee.

Of course a big reason 100% funded loans are not issued is that the borrower changes his/her mind.  I suppose many wait for a long time just to keep their options open, thus tying up investor money in the process.

The 15 minute phone interviews, requests for documentation spread out over days and days, all that takes time.  Yes the borrower may change his mind during this process but it's not like he didn't have good cause.  The borrower may not have been planning on this taking weeks.  If you do some reading on consumer complaints sites and credit-related boards you will hear some interesting stories.  By the way I've not heard anyone say that their loan was cancelled and sent through again at a different rate.

GeoUSA

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Re: Do some 100% funded notes fail to complete?
« Reply #13 on: January 24, 2014, 05:08:26 PM »
My suspicion is that this post 100% funding verification is used by LC on accounts matching a fraud profile.  Banks have become adept at identifying fraud and quickly reacting to fraudulent CC charges, so it makes sense LC is doing this too.  I think it makes sense this happens on the back-end so loans not matching a potential fraud profile go through quickly and painlessly.  Grrr -- it's always a few bad guys that ruin it for the rest of us.  Since my original post, I have had 5 loans cancelled and returned to my Available Cash.  I'm appreciative since all 5 of these appeared like good investments from the data available to me.  :P

GeoUSA

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Re: Do some 100% funded notes fail to complete?
« Reply #14 on: January 24, 2014, 05:27:27 PM »
BTW, I have applied for a Folio account.  Several days later, still waiting.

One more thought...  On LC I suspect most of us first focus on that right column and look for no data for delinquencies or public records.  Hopefully most of us know that after seven years, the slate is clean.  So we still need to realize that no data there could mean bad behavior 84 months prior.

Geo