Author Topic: Offering Hardship Plans for Borrowers and Protecting Returns for Investors  (Read 11430 times)

AnilG

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Cynic in me says, this may benefit Lending Club more than lender or borrower. LC gets another tool to manage delinquency rate by spreading out candidate borrowers across longer time frame. Fred93 will get to claim "See delinquencies are not rising."  ;)

"Ah shucks! more than expected borrowers are not making payment this month, lets put them on hardship plan so that we can spread them across 3 months to prevent falling them through loan status funnel in this quarter."

I feel the hardship loans will be a benefit to lenders and borrowers.  If borrower goes on hardship then the lender gets at least double payment or at least 3 months of payments.  Which is better than getting nothing at all. 

If it will help in less Igp or defaults then that to me seems like a benefit just as long as we don't get charged a service fee for it
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Fred93

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If borrower goes on hardship then the lender gets at least double payment

There are no "double payments".

Osito

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If borrower goes on hardship then the lender gets at least double payment

There are no "double payments".

I don't know how you figure there are no double payments it states they have to be current to use hardship.  So let's say this is the first month that they call for hardship and they are current.
So.....

1st month they pay interest only on let's say .30. (All fractional lenders)
2nd month they pay interest only again         .30. (All fractional lenders)
3rd month they pay interest only again.         .30 ( all fractional lenders)

Now this means all those who lent makes .90 cents for the three months
On the 4th month they (I'm not sure). If they pay full amount owed due as on note or if this is a re-negotiated amount). But if they pay their normal amount which would be .30 for interest and let's say .40 for principal that means one made total $1.60 which I don't care how one would look at it is still .90 cents more than if he or she didn't take a hardship.

Unless I just didn't clearly understand it.
« Last Edit: April 11, 2017, 11:57:04 AM by Osito »

Osito

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Cynic in me says, this may benefit Lending Club more than lender or borrower. LC gets another tool to manage delinquency rate by spreading out candidate borrowers across longer time frame. Fred93 will get to claim "See delinquencies are not rising."  ;)

"Ah shucks! more than expected borrowers are not making payment this month, lets put them on hardship plan so that we can spread them across 3 months to prevent falling them through loan status funnel in this quarter."

I feel the hardship loans will be a benefit to lenders and borrowers.  If borrower goes on hardship then the lender gets at least double payment or at least 3 months of payments.  Which is better than getting nothing at all. 

If it will help in less Igp or defaults then that to me seems like a benefit just as long as we don't get charged a service fee for it

Fred or whoever can take a lump sum of people and make a graph all day long that only tells you about the group as a whole.  Since its suggested that one should deposit $2500 dollars and do at least a min of 100 notes there is no way that everyone in that graph has done this so what Fred is projecting is kinda a flawed graph.  How many of those only put $25-$100 notes in and have just lost their money or did a just deposited $100 dollars and bought 1 note etc...

I use to be in sales and there is an equation we used but we applied it to the individual to see how many calls or knocks on doors before one made a sale.

I don't see this as being that bad right now here is what I see.

I have 114 notes total out of that 5 are paid one is on payment plan and one is 16-30 late if I continue doing what I am doing picking my own notes then in a perfect world and on paper 228 notes would mean 10 paid  at least 2 on 16-30 late 2 on payment plan and one would be charged off or defaulted.

Just because it's on paper doesn't mean that's how it's going to work.

all Fred is showing is an estimate of what is happening or has happened

(By the way I started with 100 notes and stopped depositing because of my own personal issues

fliphusker

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They do not have to be current to get into the hardship program. They just can not be more than 30 days late.
As they will only be paying interest only, they will not be making double payments. Only be paying interest twice. Their loan basically gets extended by three months. 36 and 60-month loans now become 39 and 63-month loans.
I think what you are thinking in your scenario is how payment plans work. Where they have to pay the full amount at some point during those three months.
If borrower goes on hardship then the lender gets at least double payment

There are no "double payments".

I don't know how you figure there are no double payments it states they have to be current to use hardship.  So let's say this is the first month that they call for hardship and they are current.
So.....

1st month they pay interest only on let's say .30. (All fractional lenders)
2nd month they pay interest only again         .30. (All fractional lenders)
3rd month they pay interest only again.         .30 ( all fractional lenders)

Now this means all those who lent makes .90 cents for the three months
On the 4th month they (I'm not sure). If they pay full amount owed due as on note or if this is a re-negotiated amount). But if they pay their normal amount which would be .30 for interest and let's say .40 for principal that means one made total $1.60 which I don't care how one would look at it is still .90 cents more than if he or she didn't take a hardship.

Unless I just didn't clearly understand it.

Rob L

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Goldman's Marcus has always had a hardship feature of sorts. From their web site:

"The Payment Deferral Feature is a benefit for customers who consistently pay on time. After making 12 or more consecutive monthly payments, you can defer one payment as long as you have made all of your prior payments in full and on time. We will waive any interest incurred during the deferral, and extend your loan by one month (you will pay interest during this extra month). Your payments resume as usual the month after the deferral. If you miss a payment or pay late once, you lose access to the feature for the life of your loan."

Depending on interest rate, term, and number of payments made to date, deferring a single payment may result in more money in pocket for a hardship borrower than interest only payments for three months.

dr.everett

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After reading the discussions so far I look at it this way. On average I have about 150 notes a month totaling $4-5K a month go bad (31-60). Very few of them go back to current. (5-10 a month if I'm lucky..)

If their hardship program makes a difference, great. If it turns out to be lipstick or window dressing, not good.

Osito

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After reading the discussions so far I look at it this way. On average I have about 150 notes a month totaling $4-5K a month go bad (31-60). Very few of them go back to current. (5-10 a month if I'm lucky..)

If their hardship program makes a difference, great. If it turns out to be lipstick or window dressing, not good.

+1

mrwhizzard

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So one of my IGP notes is on a "Hardship Plan" now.





Based on the dates in the collection log, it looks like the note was already IGP before going on the Hardship Plan. Also, some of the data in the "Upcoming Payments" section seems inconsistent, now: the "Expected Final Payment" date didn't get adjusted out, and the "Remaining Payments" count (and probably amount, but I didn't do the math) has not been updated. Also interesting is that the 4/30 payment was missed, and the Hardship Plan payments don't start until 5/30 (followed by 6/29 and 7/28). The Hardship Plan payments look like they are supposed to be equivalent to one month's interest, but because of the missed payment, they don't cover the accrued interest.
« Last Edit: May 11, 2017, 03:54:30 PM by mrwhizzard »

fliphusker

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There should be new fields to account for the plan.
The number of payments will not change, as it is the principle that is getting moved down the road.
The dates you are seeing are correct the way I understand it. The missed payment is not a big deal it just also gets moved down the road. So for the next three months, they will only be paying interest, and not principle. Then their payments will return back to normal and the 3-4 payments will be tacked onto the end.
I was under the belief that there would be a bunch more new fields involved. If you click on the payment plan, does it show more fields?

mrwhizzard

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The number of payments will not change, as it is the principle that is getting moved down the road.
The dates you are seeing are correct the way I understand it. The missed payment is not a big deal it just also gets moved down the road. So for the next three months, they will only be paying interest, and not principle. Then their payments will return back to normal and the 3-4 payments will be tacked onto the end.

I guess I would have, by definition, counted the interest-only payments as payments. But perhaps not. In either case, shouldn't the final payment date be extended? That makes me wonder though, because the prospectus clearly states for 5 year loans, that the final maturity date will not be extended:

Quote
We do not extend the maturity date of any five year term member loan and corresponding notes based upon a potential tax issue that could result from an extension to greater than five years. If the maturity date was extended beyond five years, a portion of the interest paid on the Notes would likely not be deductible by Lending Club.

I was under the belief that there would be a bunch more new fields involved. If you click on the payment plan, does it show more fields?

I don't see anything on the web page, anyway. I haven't downloaded the csv file to check there, however. This is what I see when I click "On Hardship Plan":


fliphusker

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If that is in the perspective, I am going to then assume that 60-month notes are not eligible.
I was under the impression that there was going to be 15 new fields (or something like that) added with hardship plans. I do not buy primary market notes and have not seen any hardship notes listed on FOLIO, yet.
Earlier in the thread, there should be the LC page in regards to the fields and probably better explanation than what I am currently doing.

nonattender

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I guess I would have, by definition, counted the interest-only payments as payments. But perhaps not. In either case, shouldn't the final payment date be extended? That makes me wonder though, because the prospectus clearly states for 5 year loans, that the final maturity date will not be extended:

Quote
We do not extend the maturity date of any five year term member loan and corresponding notes based upon a potential tax issue that could result from an extension to greater than five years. If the maturity date was extended beyond five years, a portion of the interest paid on the Notes would likely not be deductible by Lending Club.

The "five year" issue is one that we discussed, here, in another context, about... hmm... five years ago. :)

http://forum.lendacademy.com/index.php/topic,530.0.html

I don't have the "answer", but that thread may shed light.
A little nonsense now and then is relished by the wisest men.

mrwhizzard

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I was under the impression that there was going to be 15 new fields (or something like that) added with hardship plans.

I downloaded the csv, and found that there are indeed 15 hardship-related fields. In case anyone is interested, this is what they say for this note:

HARDSHIP_FLAG: Y
HARDSHIP_TYPE: INTEREST ONLY-3 MONTHS DEFERRAL
HARDSHIP_REASON:
HARDSHIP_STATUS: ACTIVE
DEFERRAL_TERM: 3
HARDSHIP_AMOUNT: 384.81
HARDSHIP_START_DATE: 5/8/2017
HARDSHIP_END_DATE: 7/31/2017
PAYMENT_PLAN_START_DATE: 5/31/2017
HARDSHIP_LENGTH: 3
HARDSHIP_DPD: 8
HARDSHIP_LOAN_STATUS: In Grace Period
ORIG_PROJECTED_ADDITIONAL_ACCRUED_INTEREST: 1154.43
HARDSHIP_PAYOFF_BALANCE_AMOUNT: 18965.31
HARDSHIP_LAST_PAYMENT_AMOUNT: 684.91

Fred93

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We need DEFINITIONS for those fields.  If you talk with LC about any of this, please make that point.