Author Topic: How did this note ever recieve an A1 grade?  (Read 212 times)

Reginald

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How did this note ever recieve an A1 grade?
« on: November 10, 2018, 12:28:11 PM »
Found this in my recent chargeoff's.

13 payments were made with 23 to go.
Loan Summary
Note Issuance Date   4/20/17
Note Amount   $25
Loan Amount   $12,000
Rate   A1 : 5.32%
Term   36  months
Status   Charged Off
Recent Credit Score   560-564
Credit Score Change ?
Down
Received Payments

 Check the origial listing:

https://www.lendingclub.com/account/loanDetail.action?loan_id=105101138

  • Is this the best LC can do in underwriting thir loans?

     
  • Can you spot at least 1 red flag?

Member_112971850's Profile (all information not verified unless noted with an "*")
Home Ownership   MORTGAGE
Job Title   lieutenant
Length of Employment   10+ years
Gross Income   $12,500 / month
Debt-to-Income (DTI)   7.57%
Location   110xx
Member_112971850's Credit History (as reported by credit bureau on 4/7/17)
Credit Score Range:   720-724
Earliest Credit Line   04/2001
Open Credit Lines   7
Total Credit Lines   21
Revolving Credit Balance   $12,609.00
Revolving Line Utilization   45.50%

Inquiries in the Last 6 Months   0
Accounts Now Delinquent   0
Delinquent Amount   $0.00
Delinquencies (Last 2 yrs)   0
Months Since Last Delinquency   40

Public Records On File   0
Months Since Last Record   n/a
Months Since Last Major Derogatory   n/a
Collections Excluding Medical   0
« Last Edit: November 10, 2018, 12:33:26 PM by Reginald »

Reginald

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Re: How did this note ever recieve an A1 grade?
« Reply #1 on: November 10, 2018, 12:37:52 PM »
Huh - just noticted another one - lines of credit 7,  total lines of credit 21 ? why the huge discrepancy?  All this with 12,500/month income.  ;-)

Debt Free

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Re: How did this note ever recieve an A1 grade?
« Reply #2 on: November 10, 2018, 07:13:57 PM »
14 closed credit lines / loans that still appear on the credit report?

Rob L

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Re: How did this note ever recieve an A1 grade?
« Reply #3 on: November 10, 2018, 07:31:29 PM »
Gross Income $12,500 per month. Job Title: lieutenant

Pay for a US Army 1st Lieutenant is $3,496.50 - $4,839.00 per month.

A Colonel is a field officer in the United States Army at DoD paygrade O-6. A Colonel receives a monthly basic pay salary starting at $6,552 per month, with raises up to $11,600 per month once they have served for over 30 years.

As of 2011, generals in the army, air force or marines earn a pay grade of $15,401 a month, or $184,812 a year, at 20 years of active duty, according to Department of Defense information provided to the U.S. Bureau of Labor Statistics.

I'm amazed 13 payments were made before default.


Fred93

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Re: How did this note ever recieve an A1 grade?
« Reply #4 on: November 10, 2018, 10:18:15 PM »
Nice high credit score.  Low DTI.  Seems reasonable to me.

He was late on something once four years ago.  Doesn't seem like a big dela to me.

It is easy, after the fact, to look at credit details and pick something and yell "AH HA!".   Doesn't mean its causal.

His credit balance is about the same as the amount of the loan, which is what you expect when a person is taking a loan to replace their credit card debt, and thus pay a lower interest rate.  In practice, people doing that are a better than average risk.


Rob L

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Re: How did this note ever recieve an A1 grade?
« Reply #5 on: November 11, 2018, 12:33:46 PM »
Well FRED93 you often seem to like to take the other side of an opinion. Contrarian investor.

This loan is a "poster boy" for the diminishing returns LC has been serving up to its investors for years now. Honestly, if you had personally taken a look at this loan and seen a lieutenant with an unverified income of $12,500 per month you would have invested? Before or after the fact I don't see that happening. Your returns are too good for that.

"Nice high FICO score" 720-724 for an A1 loan rate; really? There have been 35 charge offs of A1 loans originated in 17Q2 so far. There were 1068 loans originated at FICO high 729 or less and 15 have been charged off. There were 1034 loans originated at FICO high 779 or higher and 4 have been charged off. So 50 higher FICO points matters (obviously). My point is simply that LC is grading and originating these loans the same; A1 interest rate. That's the best return we investors can hope to get. The FICO brackets I chose were the same size (the bottom and top 1000 loans ranked by FICO) but the lower bracket has about four times the charge off rate. LC has always claimed all loans within a sub grade are equivalent; that doesn't seem to be the case at all here, using nothing but a simple FICO score filter.

It's been a very long time since I looked at this stuff, but I do not remember finding a mathematical correlation between loan amount requested and credit card debt outstanding. You say it's so and maybe you found a correlation. Sounds reasonable, but without revealing secret sauce can you say you did find such a mathematical correlation that was statistically significant?


rawraw

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Re: How did this note ever recieve an A1 grade?
« Reply #6 on: November 11, 2018, 04:15:38 PM »
Borrowing amounts between 80 percent and 120 percent of outstanding debt meaningfully improves performance in back tests for debt consolidation loans. It is a way of indirectly verifying the loan purpose is true

Fred93

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Re: How did this note ever recieve an A1 grade?
« Reply #7 on: November 11, 2018, 07:11:11 PM »
Borrowing amounts between 80 percent and 120 percent of outstanding debt meaningfully improves performance in back tests for debt consolidation loans. It is a way of indirectly verifying the loan purpose is true

Exactly.

AnilG

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Re: How did this note ever recieve an A1 grade?
« Reply #8 on: November 12, 2018, 12:49:30 AM »
It will be very difficult to guess that this loan will go bad ahead of issuance. I seriously doubt any automated system would have considered this loan bad to lend during the time it was available for funding. Only, if you were lending manually, reviewed the extended credit data on the loan, and loan took long enough to fund so that you can extract, evaluate, and analyze this particular loan, yes there were some questionable items in extended credit attribute that would have raised the suspicion.

https://www.peercube.com/comment?loanid=105101138
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Anil Gupta
PeerCube Thoughts blog https://www.peercube.com/blog
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