Author Topic: 54% Chance of a 31-120 Note going current.  (Read 7906 times)

New Jersey Guy

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54% Chance of a 31-120 Note going current.
« on: March 25, 2013, 04:08:44 PM »
Am I right?  Lending Club reports that a 31-120 day late note has a 54% chance of going current?  Rev posts that stat on his IR summary.

That's gotta be hogwash.  Otherwise, I'd be rolling in the dough.

I've purchased over 120 distressed notes since Feb. 1st.  I'm still holding 67, the rest were sold.  Out of all those notes I sold,

1 went current.
7 made partial payments, but not go current.

Of the 67 I'm still holding, all have gone through 1 payment period, half have gone through two payment periods.  Not a single cent paid on 67 notes.

I've probably had 10 or 11 (31-120 day) notes go current over the past 5 months.  I can't say for sure how many notes I churned without going back over past statements, but it's gotta be at least 250, possibly even over 300.

Now, I know I'm not taking this information based on 7-years expierence and thousands of notes.  But man!  Is it possible for somebody to actually get the real numbers?



Return over deposits:   66.82%
IRR:   86.54%
As of April 30, 2014

Randawl

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Re: 54% Chance of a 31-120 Note going current.
« Reply #1 on: March 25, 2013, 04:33:57 PM »
From LC:
Quote
How to read these graphs: of the loans in Grace Period in April 2011, 84% were partially or fully recovered by October 2011.

The emphasis should be on the word partially.  Even a single $0.01 payment contributes wholly toward that statistic as a "partial recovery" in what they quote for Grace/16-30/31-120/Default as 84%/77%/53%/4%.  It does not mean that all of those loans went current.

Would be great if they updated it as they do for the other statistics though.

brycemason

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Re: 54% Chance of a 31-120 Note going current.
« Reply #2 on: March 25, 2013, 04:38:39 PM »
You also have an element of selection bias going on here, which makes your personal statistic incomparable to LendingClub's. Your scope is those notes that have been listed on the Folio platform, whereas LendingClub's scope is all notes that ever went 30-120 Late. The good ones (those that recover very fast) never get listed on Folio.

rawraw

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Re: 54% Chance of a 31-120 Note going current.
« Reply #3 on: March 25, 2013, 06:01:44 PM »
You also have an element of selection bias going on here, which makes your personal statistic incomparable to LendingClub's. Your scope is those notes that have been listed on the Folio platform, whereas LendingClub's scope is all notes that ever went 30-120 Late. The good ones (those that recover very fast) never get listed on Folio.
This, although I'd guess the unknown but causal variable probably has to do more with FICO trend causing it to be listed on Folio.   

New Jersey Guy

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Re: 54% Chance of a 31-120 Note going current.
« Reply #4 on: March 25, 2013, 06:20:36 PM »
"This, although I'd guess the unknown but causal variable probably has to do more with FICO trend causing it to be listed on Folio.  "

No, these notes are the distressed notes already listed as 31-120 days late.  However, I try to pick them up as quickly as possible after coming out of 16-30 days late.  I never buy a note that's 70 days past last payment. 

Even though FICO may be some part of it, I cannot tell exactly why the note went up on Folio.  For all I know, Sarah could have owned the note 60-days ago.  It went into Grace Period, she had a panic attack and listed it.

All I know is that they went 60 days without a payment before I bought it.  Then, they go another 60 days without a payment while in my possession.

So, this all goes back to the "Rate of Decay" I discussed with Rev a while back.  Each day a note goes past it's last payment, the value of that note decreases slightly.  A note that is 92 days past last payment CANNOT have the same 53% chance of going current compared to a note that is 45-days past last payment.

In my (limited) experience, once a note goes past the 60-day period, the odds of it going current or even getting a partial payment are more like 7% to 8%.
Return over deposits:   66.82%
IRR:   86.54%
As of April 30, 2014

brycemason

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Re: 54% Chance of a 31-120 Note going current.
« Reply #5 on: March 25, 2013, 07:31:53 PM »
Using the full payment history that I downloaded here a while back, I may attempt to build a conditional repayment chart that shows the proportion of loans that went current after X days into 30-120. I do not trade on the Folio platform, so it's a low priority, but if there's enough interest I could take a stab.

New Jersey Guy

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Re: 54% Chance of a 31-120 Note going current.
« Reply #6 on: March 25, 2013, 08:29:53 PM »
Bryce....my theory is based on 120 days.  This is normally the time LC would default a loan if there is absolutely NO monetary response from the borrower (a total walk-away).

The cycle would start the day after the due date, even if the payment is in the "Processing" period.  Reason being is that the processing period could take 6 days before being posted "Payment Failed".  In that case, the note goes into "Grace Period" but is technically 6-days late!

That note would have a higher chance of going current because LC would attempt another withdrawal usually within 10-12 days of the original due date. 

If that payment fails, then the notes goes "16-30 days" late.  Now the odds of going current taper off significantly.  Each time the note passes a payment date, the odds drop significantly.  Like I said, I see about a 7% recovery rate once notes pass that 60 day mark.

Randawl brought up a very good point:
"Even a single $0.01 payment contributes wholly toward that statistic as a "partial recovery" in what they quote for Grace/16-30/31-120/Default as 84%/77%/53%/4%."

That should NOT contribute toward recovery!  It's not recovery!  All a partial payment does is buy the borrower (maybe) an extra 30 days before going into default!  Besides, again, I get very, very few partial payments on notes 60 days or more late!  Like I stated before, I currently have 68 distressed notes (60 days and over) listed and a grand total of $0 in payments.  THIS IS NOT THE EXCEPTION, but rather the rule since I started dealing in these notes last fall. 

On the average, I would say a good return would be $2.10 of partial payments for every $500 of outstanding principle.  That would be a result of 2 or possibly 3 notes receiving Partial Payments before I'm able to sell them.  I don't recall ever having 3 notes at once that showed partial payments while I owned them.

Out of over 130 distressed notes this month, 7 received partial payments.  Far cry from 54%

I wish it was 54%.  That means I'd be selling 1/2 of my notes at a short-term gain of $10 to $18 each!

Return over deposits:   66.82%
IRR:   86.54%
As of April 30, 2014

DanB

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Re: 54% Chance of a 31-120 Note going current.
« Reply #7 on: March 25, 2013, 09:04:04 PM »
New Jersey Guy.............So, are you saying that you (or anyone else for that matter) actually believed the 54% number? Or somehow understood that number to indicate that 54% would return to being "current"? Really?

I can't remember how many times I've pointed out the obvious problems with those charts..............& with the word "partial".


Zach

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Re: 54% Chance of a 31-120 Note going current.
« Reply #8 on: March 25, 2013, 09:08:17 PM »
I think its also important to recognize that these statistics don't break down for a borrower of different credit quality, and are fairly out-of-date (almost 2 years now). I imagine that A credit grade loans have a much higher average recovery rate than G notes. My guess is that their collections team hasn't necessarily scaled to be able to handle more of the collections in-house, which could certainly impact recovery rates.

New Jersey Guy, what credit grade are most of these notes?
« Last Edit: March 26, 2013, 09:14:26 AM by zpbsfg »

DanB

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Re: 54% Chance of a 31-120 Note going current.
« Reply #9 on: March 25, 2013, 10:16:59 PM »
To the best of my recollection that set of "recovery numbers" were put up initially in late 2011 & have not been updated ever since.

New Jersey Guy

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Re: 54% Chance of a 31-120 Note going current.
« Reply #10 on: March 25, 2013, 11:29:01 PM »
"New Jersey Guy, what credit grade are most of these notes?"

A Grade =  8
B Grade =  8
C Grade = 16
D Grade = 18
E Grade =  8
F Grade =  9
G Grade =  2

Those are the notes I'm currently holding.


I had a grand total of 19 charge off's so far this month.  12 of those charged-off after I sold them.

A Grade =  1
B Grade =  5
C Grade = 8
D Grade = 3
E Grade = 0
F Grade = 1
G Grade= 1
Return over deposits:   66.82%
IRR:   86.54%
As of April 30, 2014

New Jersey Guy

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Re: 54% Chance of a 31-120 Note going current.
« Reply #11 on: March 25, 2013, 11:37:34 PM »
Oh, one thing I've noticed?  It appears to me that after 60-days late, grade basically becomes irrelevant.  They all suck equally!

Granted, fewer A and B grades may get past the 30 day late mark but I'll tell you one thing.  Once a note hits 60 days late, regardless the grade, it's a downhill skid for nearly every one of them.

Nice of you guys to leave the Lending Club Penthouses!
Welcome to the damp and moldy BASEMENT! 
Bwhahahahahaha!
Return over deposits:   66.82%
IRR:   86.54%
As of April 30, 2014

SkaXc0re77

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Re: 54% Chance of a 31-120 Note going current.
« Reply #12 on: March 26, 2013, 01:30:40 PM »
https://www.lendingclub.com/account/loanPerf.action?loan_id=1368615&order_id=6072322&note_id=11479915 is my first foray into the moldy Basement. 

For 5 bucks I picked up this stinker.  Figured they were trying and they made the attempts to call LC, not dodging calls, and used the Payment plans 2x.  I just need a 3rd time for me to flip it back for maybe 10 - double my money, for more then 50% off the note?  Well see if they figure out their finances at the beginning of April. 

I read it somewhere on here "I spend more on a value meal at McDonalds" or something like that.. so lets see if it works out.


New Jersey Guy

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Re: 54% Chance of a 31-120 Note going current.
« Reply #13 on: March 26, 2013, 01:49:46 PM »
""I spend more on a value meal at McDonalds" or something like that.. so lets see if it works out."

Burger King!  Let's get it right!

$21.00 in outstanding principle.  If that note goes current, you can get $17 in a heartbeat.  In the meantime, I'd put it back on Folio for $7.50 just to see if there would be any takers.

IR shows no other notes up for sale for that loan.
Return over deposits:   66.82%
IRR:   86.54%
As of April 30, 2014

Lloigor

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Re: 54% Chance of a 31-120 Note going current.
« Reply #14 on: March 26, 2013, 07:53:26 PM »
Those percentages on the bar graph you mention from the statistics page, even if accurate at one time are VERY disingenuous.  A far more meaningful would be percentages of principle recovered.  If you owed $20, went late, and then paid $1 and only $1, who among us would call that a recovery?  Yes it is something, but the inclusion of partial recoveries in the statistic makes it totally meaningless.