Author Topic: 2015 & recent loan quality  (Read 56387 times)

jheizer

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Re: 2015 & recent loan quality
« Reply #45 on: October 22, 2016, 09:02:45 AM »
Hmm interesting note on credit card applications.  I'm the opposite.  We never get them anymore.  Maybe one ever few weeks.  I wonder if our score is too high to care about now or what.
Replacement to P2P Quant's Percentile Tool http://lc.geekminute.com

Fred93

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Re: 2015 & recent loan quality
« Reply #46 on: October 25, 2016, 10:59:41 AM »
Here's an interesting note (paywalled)...
http://blogs.wsj.com/moneybeat/2016/10/24/subprime-credit-card-surge-pushing-up-missed-payments/
Quote
Missed payments on credit cards that lenders issued recently are higher than on older cards, according to new data from credit bureau TransUnion. Nearly 3% of outstanding balances on credit cards issued in 2015 were at least 90 days behind on payments six months after they were originated. That compares with 2.2% for cards that were given out in 2014 and 1.5% for cards in 2013.

The poorer performance on newer cards pushed up the 90-day or more delinquency rate for all credit cards to 1.53% on average nationwide in the third quarter. Thatís the highest level since 2012.

I had never before considered, or seen any statistics broken down by "the year the card was issued".

However, this card behavior seems to line up with LC's loan behavior, ie issued in 2015 -> performs more poorly than issued in 2013 or 2014.


Rob L

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Re: 2015 & recent loan quality
« Reply #47 on: October 25, 2016, 11:57:44 AM »
I had never before considered, or seen any statistics broken down by "the year the card was issued".
However, this card behavior seems to line up with LC's loan behavior, ie issued in 2015 -> performs more poorly than issued in 2013 or 2014.

FWIW: Don't know why, but it made be think of this chart I saw a few days ago.



pclee37

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Re: 2015 & recent loan quality
« Reply #48 on: October 26, 2016, 12:29:23 AM »
Do I look at something wrong here? The chart is checking the % of current outstanding by calendar month. The percentage drops significantly in the last few months. Even if I exclude the 2016 bookings, the chart does not change

Fred93

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Re: 2015 & recent loan quality
« Reply #49 on: October 26, 2016, 06:55:26 AM »
Do I look at something wrong here? The chart is checking the % of current outstanding by calendar month. The percentage drops significantly in the last few months.

Not enough information.  The data set here is what?  Your portfolio?  I presume these are aggregate statistics.

What is the mix by vintage?  Is a significant fraction of your portfolio 2015 vintage?  We know that 2015 vintage loans and early 2016 vintage loans are performing more poorly than earlier vintages, so an increase in delinquency in recent times iis what we expect.  We know that this effect is much stronger in the higher risk vintages.  You've plotted it a different way than others have, but you're showing the same phenomena I believe.

So ... yes ... something wrong.
« Last Edit: October 26, 2016, 08:32:08 AM by Fred93 »

Fred93

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Re: 2015 & recent loan quality
« Reply #50 on: November 11, 2016, 07:30:52 PM »
Here's an update on my delinquency chart using LC's most recent data, which adds one more month data point on each curve.  As before, the last four quarters vintages are the worst performing in recent history at their age.  Arrows highlight the most recent data point on each, which you can see is out in the open, well above the rest of the pack.  Next month I think we'll begin to get data on 16Q3.


Those with narrow viewing windows may need to scroll the image to see the legend on the right.
« Last Edit: November 11, 2016, 07:35:54 PM by Fred93 »

jennrod12

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Re: 2015 & recent loan quality
« Reply #51 on: November 11, 2016, 08:42:24 PM »
Thanks, Fred,

Nice chart and the arrows really help.  What a bummer, because I joined in the last month of Q3 2015.  :-[

Would you be willing to do the same chart for 36 month loans?

Jenn

Fred93

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Re: 2015 & recent loan quality
« Reply #52 on: November 11, 2016, 09:18:52 PM »
Ok.  36 month chart...  Delinquencies are lower in general for 36 month loans than 60 month loans.  I think this is mostly because 36 month loans are more concentrated in the higher quality grades.  The degradation in recent vintages is also less visible in 36 month loans, probably for the same reason.  2016Q1 & Q2 are well above the pack, while 2015Q3 & Q4 skim the top but don't really poke up.
« Last Edit: November 11, 2016, 11:47:50 PM by Fred93 »

Rob L

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Re: 2015 & recent loan quality
« Reply #53 on: November 12, 2016, 01:43:38 PM »
Thanks for the great work!
Over the past several months LC has taken a couple of steps to address what one might call "declining borrower quality".

One step has been to tighten lending standards (like reducing max DTI) and reject applicants in greater numbers that they previously would have accepted. The graphs you've shown (and will hopefully continue in the coming months) should show the effects of these measures. We'll get our first look at 16Q3 within a week or two and that will be very interesting! Where will that first dot be?

The second step LC has taken has been to increase interest rates. These higher rates provide us lenders with compensation for acceptance of "lower quality" borrowers. I don't think this increased interest rate effect will show up on your charts, right? If not, do you have any thoughts of a way that could be incorporated into the analysis? Maybe a tough thing to do and I sure don't have an answer.

rawraw

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Re: 2015 & recent loan quality
« Reply #54 on: November 12, 2016, 05:00:47 PM »
Thanks for the great work!
Over the past several months LC has taken a couple of steps to address what one might call "declining borrower quality".

One step has been to tighten lending standards (like reducing max DTI) and reject applicants in greater numbers that they previously would have accepted. The graphs you've shown (and will hopefully continue in the coming months) should show the effects of these measures. We'll get our first look at 16Q3 within a week or two and that will be very interesting! Where will that first dot be?

The second step LC has taken has been to increase interest rates. These higher rates provide us lenders with compensation for acceptance of "lower quality" borrowers. I don't think this increased interest rate effect will show up on your charts, right? If not, do you have any thoughts of a way that could be incorporated into the analysis? Maybe a tough thing to do and I sure don't have an answer.
I think you'd have to take their current trends and make an assumption of what life time losses will be given their current trend vs history.  Then you just see how much the loss rate is higher

jennrod12

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Re: 2015 & recent loan quality
« Reply #55 on: November 16, 2016, 12:09:46 AM »
Thank you, Fred!

Jenn

Fred93

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Re: 2015 & recent loan quality
« Reply #56 on: November 20, 2016, 02:03:22 AM »
LC has released the November payments file, which I downloaded & processed tonite.  This gives me a first look at 16Q3 delinquencies.  I'm traveling so I haven't updated the charts. 

For 60mo loans, at 1 & 2 & 3 months, 16Q3 is pretty much right on top of 16Q2.   All of the Q3 loans have not yet had 3 payments, so this numbers are still evolving a bit.  LC doesn't yet show the 3 month number for Q3 in the delinquency file they publish, but I figured with 94 delinquencies out of 8988 loans that have made 3 payments, we had enough data to calculate a meaningful number.

In short, there is no evidence yet that LC's credit changes have turned around the recent credit degradation.  The good news is that unlike 16Q2, 16Q1, 15Q4, the latest quarter 16Q3 wasn't significantly worse than the prior quarter. 
« Last Edit: November 21, 2016, 06:38:13 AM by Fred93 »

Rob L

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Re: 2015 & recent loan quality
« Reply #57 on: November 20, 2016, 12:22:36 PM »
LC has released the November payments file, which I downloaded & processed tonite.  This gives me a first look at 16Q3 delinquencies.  I'm traveling so I haven't updated the charts. 

For 60mo loans, at 1 & 2 & 3 months, 16Q3 is pretty much right on top of 16Q2.   All of the Q3 loans have not yet had 3 payments, so this numbers are still evolving a bit.  LC doesn't yet show the 3 month number for Q3 in the delinquency file they publish, but I figured with 94 delinquencies out of 8988 loans that have made 3 payments, we had enough data to calculate a meaningful number.

In short, there is no evidence yet that LC's credit changes have turned around the recent credit degradation.  The good news is that unlike 16Q2, 16Q1, 15Q3, the latest quarter 16Q3 wasn't significantly worse than the prior quarter.

I take this as really bad news. You have very solid numbers for at least  the first two months of 16Q3. All the steps that LC has recently taken have failed to improve delinquency in 16Q3 over 16Q2. However, I don't think it can be argued that LC's reduction of the DTI maximum and rejection of as many as 10% of loans that would have previously been made in 16Q3 had no positive effect. It seems clear 16Q3 would have been worse (possibly much worse) than 16Q2 were it not for the steps taken by LC. It was my hope that 16Q3 would overlay 16Q1 at worst; not like that was much to hope for.

Oh well ... guess the good news is that higher interest rates are making up for some of the problem. Also, personally, my LC account is half what it once was so my investment in recently issued loans has been similarly scaled back.  Now I gotta think about suspending reinvestments completely and see how things progress next quarter.

SLCPaladin

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Re: 2015 & recent loan quality
« Reply #58 on: November 21, 2016, 02:57:49 PM »
Quote
Oh well ... guess the good news is that higher interest rates are making up for some of the problem.

In my opinion, it's all about the interest rates. LC needs to be proactively raising rates. Yeah, I know they are worried about Marcus and maintaining competitive rates to entice borrowers, but last I checked LC's problem was not lack of borrowers, it was flighty capital. Capital is only sticky when investors are earning an expected return. Read Peter's latest post on lendacademy and he is sour about his diminishing returns. He has good filters too. Economic shocks can come on suddenly, so I say that LC needs to get ahead of the curve and raise the rates in anticipation of the next credit cycle. Make make investors happy with returns in spite of rising defaults and they'll stick around.

rawraw

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Re: 2015 & recent loan quality
« Reply #59 on: November 21, 2016, 04:05:17 PM »
No offense, but if I was LC I wouldn't raise rates.  I certainly do not want yield chasing, quick to panic retail investors.  I would want more passive retail money, likely managed by a disinterested third party.  Or money that can't easily leave, like retirement accounts.  No matter what you try to do, these panicky retail people will always be this way.  And you can't just raise rates to avoid bad times.  This is a market place of a commodity and we have limited pricing power.  That's just the way consumer lending works.