Author Topic: Selling notes on FolioFN  (Read 18078 times)

jsmathur

  • Jr. Member
  • **
  • Posts: 68
    • View Profile
Selling notes on FolioFN
« on: April 08, 2013, 07:00:57 PM »
I have about 30 notes in my IRA portfolio that I'd like to sell on folioFN platform. The reason I want to sell these particular notes is that I bought them before using Interest Radar, and realize now that they are higher risk than I previously thought based on historical performance, IR01 and IR04 scores.

I haven't sold (or purchased) any notes on folioFN platform before, so I'm asking forum members with experience selling on the folioFN platform for some advice regarding pricing.

All of these notes are 60-month notes, and all are currently performing (i.e. none in grace or late in payments). They vary in terms of the FICO trend (up, down, and flat). Note values are either $100 or $200.

Does anyone with folioFN experience have any advice on how I should price these notes on folioFN?  Should I simply charge par value plus a small premium to try to cover the transaction fee? How much of an adjustment upward or downward in price to account for FICO trend can be reasonably made, such that the notes will actually sell?

SeanMcD

  • Full Member
  • ***
  • Posts: 147
    • View Profile
    • Email
Re: Selling notes on FolioFN
« Reply #1 on: April 08, 2013, 08:07:05 PM »
If you're using Interest Radar, you already have much of the information you need.  When you display loan information there, it shows FolioFn activity at the bottom, including markup for notes currently for sale and recently sold.  Where you place yourself comparative to these values depends on how quickly you want to get rid of these notes.  If you're not in a hurry, you can probably get a decent markup of a few percentage points above the trading fee, especially if their FICO has increased.

One thought on FICO scores - if it has increased, then the original credit rating and the IR01/IR04 scores for that loan are probably lower than they would be if the borrower was applying right now.  If the scores aren't that far out of line with your current filters, it might be worth hanging on to them. Rev has mentioned that there is another IR score in the works that will adjust based on current FICO score, but I don't know how far out that is.

jsmathur

  • Jr. Member
  • **
  • Posts: 68
    • View Profile
Re: Selling notes on FolioFN
« Reply #2 on: April 09, 2013, 02:36:18 AM »
SeanMcD, thanks so much. I didn't even realize that clicking on the notes actually linked to recentfolioFN sales data.

I put all of the 30 notes on the secondary market tonight. Was fairly aggressive in the pricing, but within the realm of recent sales based on the recent sales price activity. We'll see what happens. . . .

Regarding your mentioning of a possible change in how IR01 is calculated, I'm not sure the added benefit of this adjustment is worthwhile relative to the additional complexity of the scoring model. When I look at my historical note performance in different IR01 ranges, the loss rates correlate quite nicely with IR01 the way it is right now. It's not clear to me that adjusting IR01 on the fly throughout the duration of the loan will add value; Rev obviously will look at the predictive value of such a modification to the model and make a decision as to whether the adjustment makes sense.

New Jersey Guy

  • Hero Member
  • *****
  • Posts: 914
  • Hell Yea it's a Hemi!
    • View Profile
    • Email
Re: Selling notes on FolioFN
« Reply #3 on: April 09, 2013, 12:40:44 PM »
"I put all of the 30 notes on the secondary market tonight. Was fairly aggressive in the pricing, but within the realm of recent sales based on the recent sales price activity. We'll see what happens. . . ."

Be careful here!  I.R.'s sales list is very misleading, and you have to know how to read it.

Sold loans that were listed for 6 days- Take that with a grain of salt.  Odds are those were listed by the seller and expired.  They show up as sold, but were never were.

 Another good indication of a cancelled listing are stupid-high markups showing sold in 6 days.  It appears to you that people are paying well over par, and you plan on pricing yours high.  In reality, those notes never sold and you end up sitting on overpriced notes wondering why nobody is buying them.

A bunch of  notes that get sold on the same day- Misleading.  That indicates that there may have been a payment made on the loan.  Folio cancels the listing for multiple sellers, but they all show up on I.R. looking like sales.

It's kind of tricky trying to figure out what were sales and what weren't .  Generally, normal looking and discounted sales showing sold between 0 and 5 days are fairly reliable indicators.
Return over deposits:   66.82%
IRR:   86.54%
As of April 30, 2014

mhvu

  • Newbie
  • *
  • Posts: 26
    • View Profile
    • Email
Re: Selling notes on FolioFN
« Reply #4 on: April 10, 2013, 02:35:28 AM »
Spot on observation New Jersey Guy!!!

IMO, sweet spot are:

Markup: 6.49% (net 5.49% after 1% fee)
Hold: minimum 90 days
Grade: C5 or lower
FICO trend: no change or better

Just sold 6 of those bad boys this week. I think it might have something to do with low availability in loan.

Also experience mild success flipping Folio note, bought between -1 to 2% markup and sold for 6% markup.

I attached my screenshot, you can type in the noteID in interestradar.com to view my adjustment in price.

[attachment deleted by admin]
« Last Edit: April 10, 2013, 02:38:09 AM by mhvu »

New Jersey Guy

  • Hero Member
  • *****
  • Posts: 914
  • Hell Yea it's a Hemi!
    • View Profile
    • Email
Re: Selling notes on FolioFN
« Reply #5 on: April 10, 2013, 09:28:13 AM »
"I attached my screenshot, you can type in the noteID in interestradar.com to view my adjustment in price. "

I should print your screen shot out and hang it on my monitor!  Current...Current.....Current....Current all the way down.
If this was my kid's report card, he'd be getting a new toy and a Happy Meal.

I should have taken a screen shot of my sales last month.  Default....Default....Default...Default.
I turned over 57 speculative notes in March.  7 of them due to the fact they were going BK.  16 Additional notes went into default after I sold them.
Return over deposits:   66.82%
IRR:   86.54%
As of April 30, 2014

mhvu

  • Newbie
  • *
  • Posts: 26
    • View Profile
    • Email
Re: Selling notes on FolioFN
« Reply #6 on: April 10, 2013, 02:22:19 PM »
If you are active Folio user like me, consider install tampermonkey (chrome) or greasemonkey (firefox) into your browser. I wrote an extension to auto adjust markup price in the "sell" screen.

What it does is prompt you for a markup pct then update the sale price accordingly. You will not have to calculate these information manually.

Happy to help, let me know if anyone interested in my extension.

Cheer,






mhvu

  • Newbie
  • *
  • Posts: 26
    • View Profile
    • Email
Re: Selling notes on FolioFN
« Reply #7 on: April 10, 2013, 04:24:59 PM »
I turned over 57 speculative notes in March.  7 of them due to the fact they were going BK.  16 Additional notes went into default after I sold them.

What's your thought about selling notes that are current for a quick pct gain?

I have 100% of my notes on Folio. Here is the breakdown:

50% of my notes purchased via LendingClub, sell in Folio with markup of 6.49% after 3 months hold. The first 3 months I set the markup a bit higher but not above 10%
50% of them acquired bought from Folio. All of them purchased at maximum 2% markup. Resell at 6.49% markup

Laslow

  • Newbie
  • *
  • Posts: 22
    • View Profile
Re: Selling notes on FolioFN
« Reply #8 on: April 10, 2013, 05:58:21 PM »
I turned over 57 speculative notes in March.  7 of them due to the fact they were going BK.  16 Additional notes went into default after I sold them.

What's your thought about selling notes that are current for a quick pct gain?

I have 100% of my notes on Folio. Here is the breakdown:

50% of my notes purchased via LendingClub, sell in Folio with markup of 6.49% after 3 months hold. The first 3 months I set the markup a bit higher but not above 10%
50% of them acquired bought from Folio. All of them purchased at maximum 2% markup. Resell at 6.49% markup


It's an interesting idea for sure. I'm wondering if it's worth it. The factor making me wonder is the fact that default rate decreases the more aged a note gets. By selling your notes after the first three months, you're taking the risk of default on three of the highest chance of default months, and selling your note when default risk for that particular note begins to decline each month. Second, with the length of time it takes a loan to get issued, you're sacrificing  1 - 2 months of potential payments while you reinvest the proceeds, not even counting the time between the sale of the note and the receipt of the proceeds. Would a 5.5% proceed make it worth it? On a 20% note, you'd be losing 3%+ of potential interest payments while you wait.

mhvu

  • Newbie
  • *
  • Posts: 26
    • View Profile
    • Email
Re: Selling notes on FolioFN
« Reply #9 on: April 10, 2013, 06:56:53 PM »
Quote
It's an interesting idea for sure. I'm wondering if it's worth it. The factor making me wonder is the fact that default rate decreases the more aged a note gets.
By selling your notes after the first three months, you're taking the risk of default on three of the highest chance of default months, and selling your note when default risk for that particular note begins to decline each month.
Agree! The most important factor for me is pick quality note from the get going. My philosophy is "Garbage In, Garbage Stay; Quality In, Quality Out"  ;D. By selling the notes with 3-6 months hold, I maximize the interests collect and still can sell the note at a reasonable premium. If the note goes into default, it's my own fault of not picking note correctly. If the note sold, I collect $1.5 to $2.00 premium on my $25 purchase; instead of waiting 30+ months to collect the full $5-$7 interest (and chance of default). However, if the note doesn't sell because of the high markup, I will let it ride all the way till the end.

Quote
Second, with the length of time it takes a loan to get issued, you're sacrificing  1 - 2 months of potential payments while you reinvest the proceeds, not even counting the time between the sale of the note and the receipt of the proceeds.
This is why 50% of my portfolio are notes acquired through Folio. By selecting notes that are never late for 6 months, I reduce the chance of default rate and can flip those note with a higher markup. If it sells, great!, i pocket the difference in markup minus 1% fee. If it doesn't sell, I will not have any issue holding those notes till the end. Again, pick quality note in FolioN is also the key here.
Quote
Would a 5.5% proceed make it worth it? On a 20% note, you'd be losing 3%+ of potential interest payments while you wait.
Good point with the 3% loss, I will have to put some thought into this.

Cheer,

Fred

  • Hero Member
  • *****
  • Posts: 1421
    • View Profile
Re: Selling notes on FolioFN
« Reply #10 on: April 10, 2013, 09:12:05 PM »
16 Additional notes went into default after I sold them.

I have mixed feelings when reading the above:

1. Lucky you!  8)
2. Why keep track of them after selling them?  ;)

New Jersey Guy

  • Hero Member
  • *****
  • Posts: 914
  • Hell Yea it's a Hemi!
    • View Profile
    • Email
Re: Selling notes on FolioFN
« Reply #11 on: April 11, 2013, 10:14:53 AM »
"What's your thought about selling notes that are current for a quick pct gain? "

This is hedging.  This is a Hands-On approach and just slightly more aggressive than the conservative investors here who buy, and then just check their stuff once or twice a week.  Face it.  Many of the people who buy notes, buy them with the intention of keeping them and focus their efforts on squeezing that extra .5% to .75% per annum.  Personally, I think putting up good performing notes on Folio for a profit is a win-win approach despite the probable loss factor.  Everybody, including the most ultra-conservative investor, faces some sort of loss factor.

Like MHVU said, the quality of the note is key here.  Choose your notes as if your going to hold them full term.  You just might have to!  But by putting them up for sale, you basically have nothing to lose.  If a performing note just sits there on Folio for 6-months unsold, what did it cost you?  You still made the interest and paid nothing.

On the other hand, a few sold notes will accelerate your Rate-of-Return even if it's for a mere $2.00 net profit.  (Keep in mind, though, that profits made on the sale of notes are considered short-term gains, and not interest.) 

A $2.00 profit is basically the equivalent to 5-1/2 months interest on a freshly issued $25 note.  So, if you can buy a $25 note today and make $2 on it within 30 days, that pretty much come out to a 96% APR on that $25 investment.


Want to experiment at no additional risk?
  Open up a new portfolio on the LC Platform and either move or purchase about $500 worth of notes into it.  Work with those notes and see if you can't sell them over the next 6 months.  Remember to maintain that $500 in the portfolio.  If you sell a note, you need to replace it.  Check the returns on that portfolio in 6 months and see if it hasn't out-performed your current average.  What's the worst?  You sell absolutely nothing and make interest only.  In this case, you aren't out a single dime.

Again, remember, this is a Hands-On approach.  As payments are made on a note, you need to go back and revise your selling prices.  If a note receives 28-cents in principle payments, you'll need to manually go in and lower your selling price to reflect the payment in order to keep your mark-up in that "Sweet Spot".

Folio Buying/Selling has many, many levels of Risk/Reward.  For those of you with the guts to try it,  here is another idea.
See if you can find a couple notes currently in "Grace Period".  Grace Period notes generally sell for a 25% discount and have a high probability of going back to current.  Again, choose the note as if you're going to keep it.  I've sold notes where the borrower always seems to pay in the Grace Period (Probably because of the way they get their paychecks), but never actually missed a payment.

Take a $21 Grace Period Note you purchase for $14.50.  It goes current in 3 weeks.  You can list that note at a discount (not a mark-up) and end up making a respectable profit.

Throw a couple of those into your mix of high quality notes and see if that doesn't help your overall returns.



 


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

Fred

  • Hero Member
  • *****
  • Posts: 1421
    • View Profile
Re: Selling notes on FolioFN
« Reply #12 on: April 11, 2013, 09:03:32 PM »
On the other hand, a few sold notes will accelerate your Rate-of-Return ...

Agreed.

This is because the money from the sale can be reinvested in other P2P notes, sometimes with higher returns, lower risks, or both.

IMHO, this is one of the best benefits of P2P notes compared to other fixed income products (ABS, Mortgages) that suffer "Prepayment Risks".  During declining interest rate periods, banks are annoyed with people refinancing, since they will have to invest the money in a potentially lower rates. 

The yield on 2-yr treasury was 4.6% in 2007 and 0.25% now.  The average interest rates on LC notes, however, have been increasing from 11% in 2007 to 14% now (https://www.lendingclub.com/info/demand-and-credit-profile.action).

SarahV

  • Guest
Re: Selling notes on FolioFN
« Reply #13 on: April 12, 2013, 03:03:03 AM »
2. Why keep track of them after selling them?  ;)
I keep track of everything that I sell and I keep track of why I sold them (usually: missed a payment; steep FICO drop; or worrying collection log notes). Maybe in a year I will look and see that none of the people with steep FICO drops have defaulted, and in fact I should not bother selling those in the future. Or maybe I will see that the notes with worrying collection logs defaulted at a rate of 30% and I should sell them very aggressively.

It's all data. Well, I don't have enough notes for it to be REAL data, but it's better than nothing.

edward

  • Full Member
  • ***
  • Posts: 195
    • View Profile
Re: Selling notes on FolioFN
« Reply #14 on: April 12, 2013, 08:40:07 PM »
New Jersey Guy,

Although I'm implementing it differently than you suggested, your post supplied me with an answer to a problem. Thanks for sharing, explaining, and informing about the benefits of putting good quality notes on Folio and just keeping them there till they sell. I'm also using another poster's suggestion to create a portfolio for such notes and that makes it easy to keep re-listing them. That's the value in good contributors on this forum.