Author Topic: Time for LC to Raise Interest Rates?  (Read 11448 times)

Fred

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Re: Time for LC to Raise Interest Rates?
« Reply #15 on: April 21, 2016, 10:34:57 PM »
If you see this from marketing's perspective, it could be argued that LC is trying to discourage high-risk borrowers and encourage low-risk ones.

PhilGD

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Re: Time for LC to Raise Interest Rates?
« Reply #16 on: April 21, 2016, 11:28:56 PM »
If you see this from marketing's perspective, it could be argued that LC is trying to discourage high-risk borrowers and encourage low-risk ones.

How does that argument work? The way I see it, low-risk borrowers are more interest rate sensitive because they know they're worth a better rate, and they have plenty of institutions willing to lend to them. High risk borrowers probably don't care about a 1% bump because they were already looking at 20%+ before the rate hike anyway.

Therefore the D5+ credit grades (the ones where the interest rate increased) are likely to see riskier borrowers going forward because all of the "good risks" in those credit grades are the borrowers that actually care how much interest they'll be paying. The good risks might just go somewhere else now.
« Last Edit: April 21, 2016, 11:33:22 PM by PhilGD »

Fred

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Re: Time for LC to Raise Interest Rates?
« Reply #17 on: April 22, 2016, 12:24:37 AM »
If you see this from marketing's perspective, it could be argued that LC is trying to discourage high-risk borrowers and encourage low-risk ones.

How does that argument work?

If I am a high-risk say E-1 borrower, before I could borrow at 19.99%, now I need to borrow at 20.99%.

bobeubanks

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Re: Time for LC to Raise Interest Rates?
« Reply #18 on: April 22, 2016, 01:00:09 AM »
If you see this from marketing's perspective, it could be argued that LC is trying to discourage high-risk borrowers and encourage low-risk ones.

I don't think LC is looking to discourage any borrowers. More likely, they are trying to either attract more investors to the hisk-risk loans and/or raising rates because default rates have been higher than they projected.

PhilGD

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Re: Time for LC to Raise Interest Rates?
« Reply #19 on: April 22, 2016, 07:59:36 AM »
If you see this from marketing's perspective, it could be argued that LC is trying to discourage high-risk borrowers and encourage low-risk ones.

How does that argument work?

If I am a high-risk say E-1 borrower, before I could borrow at 19.99%, now I need to borrow at 20.99%.

I would argue that if you view E1 borrowers on a spectrum of "Best" to "Worst" then the "best" E1 borrowers will be discouraged and the "worst" will stay.

dompazz

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Re: Time for LC to Raise Interest Rates?
« Reply #20 on: April 22, 2016, 01:39:06 PM »
More likely, they are trying to either attract more investors to the hisk-risk loans and/or raising rates because default rates have been higher than they projected.
Definitely the later and less of the former.  I don't think investor demand for high risk loans was low, I think the price was too high (low rate = high price).  In the last day, I have seen many more high risk loans passing my scores, simply because the rate is higher. 

The demand curve didn't shift, LC is attempting to find an equilibrium price where the market clears.

lascott

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Re: Time for LC to Raise Interest Rates?
« Reply #21 on: June 07, 2016, 03:20:45 PM »
6/7/2016 rate change compared to previous

<snip> -- see new chart two post down with previous years comparison.
« Last Edit: June 08, 2016, 01:58:32 AM by lascott »
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mchu168

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Re: Time for LC to Raise Interest Rates?
« Reply #22 on: June 07, 2016, 04:03:28 PM »
http://www.sec.gov/Archives/edgar/data/1409970/000140997016002239/0001409970-16-002239-index.htm

This is exactly the right move.  Tighten up lending standards to reduce pool of eligible borrowers and increase expected returns.  Less marketing to borrowers will help too. Supply and demand will eventually find an equilibrium.

fliphusker

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Re: Time for LC to Raise Interest Rates?
« Reply #23 on: June 07, 2016, 06:50:19 PM »
lascott, thanks for the info, much appreciated. 

Rob L

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Re: Time for LC to Raise Interest Rates?
« Reply #24 on: June 07, 2016, 08:05:57 PM »
Yeah, thanks. Adding one more column on the end showing the total difference from 9/19/2015 to date would be super impressive.
This speaks volumes more to me than any Dear investor, ... Substantive change in risk / reward. Seems a really smart move.
Whether or not the overall risk / reward is satisfactory is up to each individual investor of course.

twigster

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Re: Time for LC to Raise Interest Rates?
« Reply #25 on: June 08, 2016, 01:56:14 AM »
Quote
E-G grades 1-2% rate increase. Those notes should be on fire sale on Folio now
I have a script which runs looking for neverlates on folio which are marked at a discount.  A lot of the notes I see are the lower grade D's and E's in which the differential is 1-2%, so a lot of them seem to be for sale.  These are not that great a deal anymore and are discounted appropriately, since the ytm is often significantly less than the current rates.

Thanks for posting the chart showing current rates vs last two rate increases as I had been thinking it was more evenly spread, I think they probably just realized the default rates on these lower grades is higher than anticipated.

lascott

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Re: Time for LC to Raise Interest Rates?
« Reply #26 on: June 08, 2016, 01:57:46 AM »
Adding one more column on the end showing the total difference from 9/19/2015 to date would be super impressive.

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Rob L

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Re: Time for LC to Raise Interest Rates?
« Reply #27 on: June 08, 2016, 09:24:57 AM »
Thanks; those increases in higher risk loans are huge. All in only 9 months.
The changes yesterday were accompanied by a statement that forecast probabilities of default did not change from the previous increase.
Certainly merits consideration.

jheizer

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Re: Time for LC to Raise Interest Rates?
« Reply #28 on: June 08, 2016, 10:57:58 AM »
Stinks in that I just last night completed a new secondary market purchasing system.  Now its not going to buy much of anything as to be worthy now they have to be discounted more than almost anyone will do.  Giant waste of time.
Replacement to P2P Quant's Percentile Tool http://lc.geekminute.com

SLCPaladin

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Re: Time for LC to Raise Interest Rates?
« Reply #29 on: June 08, 2016, 11:30:51 AM »
I wonder, if when implementing these interest rate increases, did the LC board have in the back of their minds the impact that this might have in keeping notes off Folio? Those investors (myself) who might be tempted to liquidate their notes might hold off now that they are likely to have to further discount just to remain competitive with newly issued notes. Seems to be a savvy approach in steering lenders to new notes and keeping Folio note count down, the number of which could be taken as a proxy for investor fear.