New Interest Rates

[jheizer]

In case you missed the email.

http://kb.lendingclub.com/siteupdates/articles/Site_Updates/Updates-to-Interest-Rates-Effective-May-2015

Loan Grade   Previous Interest Rate   Updated Interest Rate*
A   6.95%   6.96%
B   10.06%   10.06%
C   13.32%   13.32%
D   16.81%   16.81%
E   19.49%   19.18%
F   24.10%   23.47%
G   25.87%   27.51%

[LendingAlpha.com]

Here's the analysis on the changes. I'm surprised to see a new change to the rates, but LC mostly made changes to the sub grades that they didn't adjust aggressively in February.

Here's a comparison between the last two interest rate changes (Nov 2014 vs. Feb 2015, and Feb 2015 vs. May 2015):


Impact to the average investor:


More commentary here:
https://lendingalpha.com/blog/2015-05-16-interest-rate-changes-sub-grade-analysis/

[Fred]

On your chart in https://lendingalpha.com/blog/2015-05-16-interest-rate-changes-sub-grade-analysis/



Where did you get the charge-off rates?  For F+G grades, your chart shows charge-off rates of between 11% - 11.6%

LC published their charge-off rates with SEC here, which shows F+G charge-off rates between 15% - 25%:
http://www.sec.gov/Archives/edgar/data/1409970/000119312514397209/d794350d10q.htm

[LendingAlpha.com]

I used the same charge off rates as they published from the February 2015 rate changes. They did not publish new c/o rates along with the rate changes this time around.

http://kb.lendingclub.com/siteupdates/articles/Site_Updates/Updates-to-Interest-Rates-and-Expected-Charge-Off-Rates-Effective-Feb-4-2015

[Fred93]

For F+G grades, your chart shows charge-off rates of between 11% - 11.6%

LC published their charge-off rates with SEC here, which shows F+G charge-off rates between 15% - 30%

The SEC document's curves are historical.  The newly published projected charge-off rates are their estimate for current loans.  (says something like that in the footnote)

LC expect current loans to do much better than the 2008-2011 loans.  Seems reasonable, if we don't have another big recession.

[Fred]

It seems the difference is more about "cumulative" (SEC charts) vs. "average" (LC table).

[Fred93]

You're right. 

[rawraw]

Vintage loss curves are always going to be 'higher' than if you just take losses and divide it by total loans outstanding.  My understanding is that this is the difference in the two calculations.

[Fred]

As a Folio trader, I feel the cumulative (vintage) charge-off charts are some of the best (and most revealing) information published by LC.  So many strategies can be extracted out of them.

[rawraw]

As a Folio trader, I feel the cumulative (vintage) charge-off charts are some of the best (and most revealing) information published by LC.  So many strategies can be extracted out of them.

I think in general, vintage charge off data is superior.  I can't think of any instances where it isn't, except for maybe if your trying to spot trends quicker (vintage data takes time) or make peer comparisons where there vintage data isn't available (like FRED data, bank data, etc).