Author Topic: Folio Selling - most transactions are cancelled due to 'payment processing'  (Read 6094 times)

investor88

  • Newbie
  • *
  • Posts: 17
    • View Profile
I am trying to sell notes on Folio.  So far the majority of the transactions have been cancelled (almost 90%) with Folio giving the reason 'canceled, payment processing'.
Why are so many of the transactions being canceled?
For people selling on Folio, what percentage of your transactions are canceled without being completed?

fliphusker

  • Sr. Member
  • ****
  • Posts: 463
    • View Profile
    • Email
Notes on Folio can not be sold with a payment pending designation.  So then FOLIO takes them off the market.  Once the payment is made then you have to relist it. 
As I am not actively trying to sell notes, I very rarely ever have a note sell even though I have them listed.  This is due to the markup I place on the notes. 

rj2

  • Jr. Member
  • **
  • Posts: 85
    • View Profile
I would like to clarify how this works as well.

Here's what I believe and I'm hoping someone can confirm: If I list a note that is 31-120 days late with a steep discount, and then the borrower submits a payment to bring the note current again, my offer to sell that note will be removed from folio as soon as LC sees that payment processing.

Is that correct? I believe that this exists so that I don't wind up with a note that is now current, but steeply discounted as if it were 31+ days late. Obviously, those would immediately sell.

Can someone confirm that this is how the payment processing logic works, that it prevents notes from selling when they change status between current/late?

Fred93

  • Hero Member
  • *****
  • Posts: 2221
    • View Profile
Can someone confirm that this is how the payment processing logic works, that it prevents notes from selling when they change status between current/late?

Yes indeed.  They cancel sale offers when payments are processing, to avoid the possibility of the surprising event you describe. 

Rob L

  • Hero Member
  • *****
  • Posts: 2108
    • View Profile
I'll take that one step further, but someone more knowledgeable please correct me if I'm wrong.
A loan goes "pending payment" the day before a payment is scheduled. All note sell orders for that loan are cancelled.
It sits "pending" for xxx days until the scheduled payment is processed.  Notes cannot be listed for sale while the loan is "pending". If a payment fails then the loan status is changed and pending status is removed.
If an unexpected non-scheduled payment is received all sell orders are cancelled and all trades made that day are broken.
Is this about right?

Fred

  • Hero Member
  • *****
  • Posts: 1421
    • View Profile
This link shows 4 reasons:
http://kb.lendingclub.com/foliofn/articles/FolioFn/Why-did-a-trade-or-listing-cancel/

Why did a trade or listing cancel?
 
A trade or listing may be cancelled for the following reasons:
- Lending Club is processing a payment that was received on the loan corresponding to the listed Note. 
- Lending Club received a special payment from a Borrower and Lending Club is in the process of distributing that payment to investors. 
- The loan corresponding to the listed Note moved into a Default or Charge Off status.
- A bankruptcy filing related to the loan corresponding to the listed Note is pending.

« Last Edit: August 17, 2016, 03:32:08 AM by Fred »

Paulie2083

  • Newbie
  • *
  • Posts: 27
    • View Profile
    • Email
at least for me, payments tend to be cancelled on their scheduled due date regardless of whether or not the borrower attempts to make a payment on said date.

Fred93

  • Hero Member
  • *****
  • Posts: 2221
    • View Profile
at least for me, payments tend to be cancelled on their scheduled due date regardless of whether or not the borrower attempts to make a payment on said date.

Borrowers don't do anything on due dates. 

On the payment due date, LC initiates an ACH "pull" from borrower's bank account.  This transfer succeeds if the money is there, and fails if it is not.  The payment may also fail if it initially succeeds, and then the borrower asks his bank to reverse the transaction. 

LC doesn't decide whether the transfer has succeeded or failed until 4 business days after the pull is initiated.  At that time, if LC has the money in hand, and the bank hasn't asked for it to be returned, LC declares success and books the payment.

LC cancels sales offers as this process starts, so that notes don't get sold during this period of ambiguity.

Rob L

  • Hero Member
  • *****
  • Posts: 2108
    • View Profile
Sounds right to me.