Author Topic: How do I price/discount a note on a payment plan?  (Read 6173 times)

Sela

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How do I price/discount a note on a payment plan?
« on: January 01, 2015, 04:25:44 AM »
I have a note that was late (16-30 days), and now it's back to Current, but on a payment plan.

There is a list of comments on the collection log. On the same date, there is a note saying "Borrower was unable to pay at this time", and "Borrower promised to pay".

He paid and its back to current, but I'm a bit worried about this note and the future ability of this lender to pay on time, so I want to sell it on FolioFN. The problem is, I have no idea what discount to offer. I know that grace-period notes have 20% chance to default, and 16-30 late notes have 45% to default, so a discount should be smaller than these numbers. But I have no idea what value to give to such a current-but -suspicious note. 

Any ideas?


rawraw

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Re: How do I price/discount a note on a payment plan?
« Reply #1 on: January 01, 2015, 02:07:56 PM »
How about start at a 1% mark up and knock it down a few clicks every day.

yojoakak

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Re: How do I price/discount a note on a payment plan?
« Reply #2 on: January 01, 2015, 11:05:31 PM »
There's usually plenty of never-late notes for sale at less than 1% markup.

Why would someone buy your note instead of one of those?
« Last Edit: January 01, 2015, 11:08:02 PM by yojoakak »

rawraw

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Re: How do I price/discount a note on a payment plan?
« Reply #3 on: January 02, 2015, 06:08:29 AM »
There's usually plenty of never-late notes for sale at less than 1% markup.

Why would someone buy your note instead of one of those?
I don't know why but it happens.

hoggy1

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Re: How do I price/discount a note on a payment plan?
« Reply #4 on: January 02, 2015, 09:49:39 AM »
Haven't heard from Core in a while. This question is right up his street.
Steve

AnilG

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Re: How do I price/discount a note on a payment plan?
« Reply #5 on: January 05, 2015, 02:27:46 AM »
Presently on FOLIOfn, Current notes that were previously late has average markup of +3.61% and minimum markup of -20.06%. Without knowing anything else specific about the note and depending on your urgency to unload, price it somewhere in the middle and follow 'rawraw' suggestion to incrementally lower the sell price every few days until sold or you decide any price below which it is not worth selling.

When I am purchasing/selling notes, I typically look at the sell price of other notes for same loan, the historical sell pricing trend for notes from same loan, and price my note accordingly. If there is no other note listed for same loan, then I look at aggregate markup data based on Loan Status, whether loan was previously late or not, FICO Trend, Days since Payment, Vintage and Grade and price my note accordingly.
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BBingo

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How do I price/discount a note on a payment plan?
« Reply #6 on: January 05, 2015, 04:49:23 PM »
I would personally start at par and work it down perhaps .5% every 12 hours or so. I'd throw out a wild guess it sells around -5% of face value, just based on other notes I've seen that seem similar (not any empirical analysis). There seem to be a lot of investors willing to buy at MUCH higher prices on foliofn than most of the folks on this board. That is evidenced by the hefty number of notes sold at +2% markups by folks here. So, work it down gradually, and I'd put money on it being sold before you hit -10%


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Fred

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Re: How do I price/discount a note on a payment plan?
« Reply #7 on: January 07, 2015, 11:25:48 PM »
If you have a lot of time, you can following the advice above -- start from near par, and lower every day.

However, if you want to be efficient, find all notes with similar grade, fico-trend, status, etc., and set the price slightly lower than the lowest.  This will significantly enhance (but not guarantee) the chance of sale.

rawraw

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Re: How do I price/discount a note on a payment plan?
« Reply #8 on: January 08, 2015, 08:23:12 AM »
If you have a lot of time, you can following the advice above -- start from near par, and lower every day.

However, if you want to be efficient, find all notes with similar grade, fico-trend, status, etc., and set the price slightly lower than the lowest.  This will significantly enhance (but not guarantee) the chance of sale.
It takes me less than a minute a day to log in my phone while waiting in line and moving FolioFN prices down.    I used to use the "Market comps" data, but my average sales price was significantly less so I stopped.

rock413

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Re: How do I price/discount a note on a payment plan?
« Reply #9 on: January 08, 2015, 12:38:26 PM »
I would start at a 3% discount and update everyday until sold. I would agree that the note will sell at about a 5% discount. That is about where notes I sell end up selling at.

rawraw

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Re: How do I price/discount a note on a payment plan?
« Reply #10 on: January 09, 2015, 07:00:53 AM »
Over the course of this thread I sold 20 notes with various past characteristics but all current (and large FICO drops) at various rates between 1% markup and 1.5% discount.   I only have 2 notes remaining of the original 22 that I just clicked down to 2.5% discount.  Don't know if that helps you any.

gskalt

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Re: How do I price/discount a note on a payment plan?
« Reply #11 on: January 20, 2015, 09:59:17 AM »
This may seem like a silly question.. but hey... I'm brand new to this!  when you say "face value", are you speaking to the remaining principal or the full par value of the original note?  pretty sure you mean the remaining principal but just want to be sure.

rock413

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Re: How do I price/discount a note on a payment plan?
« Reply #12 on: January 21, 2015, 11:17:21 AM »
Face value refers to remaining principle of the loan