Lend Academy Network Forum

Lending Club Discussion => Investors - LC => Topic started by: viking on January 06, 2013, 06:47:19 PM

Title: Borrowers with >$20,000/month Income
Post by: viking on January 06, 2013, 06:47:19 PM
Some borrowers claim more than $20,000/month in income. See for example LoanID 3065326:
https://www.lendingclub.com/account/loanDetail.action?loan_id=3065326
who claims $37,500/month income.
It is probably an error (maybe should be $37,500/year) but it throws off the DTI ratio.

Do you invest in these type of loans?
Title: Re: Borrowers with >$20,000/month Income
Post by: Grant on January 06, 2013, 06:53:01 PM
Nope. If its an error I want the correct number before investing.  If it's not an error, something is seriously wrong with the borrower as most banks will give an unsecured line of credit at 6% or less for people with higher incomes such as this.
Title: Re: Borrowers with >$20,000/month Income
Post by: Zach on January 06, 2013, 06:57:14 PM
Some borrowers claim more than $20,000/month in income. See for example LoanID 3065326:
https://www.lendingclub.com/account/loanDetail.action?loan_id=3065326
who claims $37,500/month income.
It is probably an error (maybe should be $37,500/year) but it throws off the DTI ratio.

Do you invest in these type of loans?

I believe that historically, the borrower has entered their income incorrectly (thinking that it was an annual figure, not monthly). The debate should really be focused on the borrower not caring enough to read the application questions or make the proper selection of whether or not the amount they're inputting is annual/monthly.

It would surprise me that LC would not automatically flag listings with incomes of greater than $15k/month.
Title: Re: Borrowers with >$20,000/month Income
Post by: rawraw on January 06, 2013, 07:35:18 PM
Nope. If its an error I want the correct number before investing.  If it's not an error, something is seriously wrong with the borrower as most banks will give an unsecured line of credit at 6% or less for people with higher incomes such as this.
Not true.  Income is only part of the lending process.

I don't, unless its verified.  And I've had a few verified ones that high.
Title: Re: Borrowers with >$20,000/month Income
Post by: Grant on January 06, 2013, 07:58:08 PM
Nope. If its an error I want the correct number before investing.  If it's not an error, something is seriously wrong with the borrower as most banks will give an unsecured line of credit at 6% or less for people with higher incomes such as this.
Not true.  Income is only part of the lending process.

I don't, unless its verified.  And I've had a few verified ones that high.
Yes, you're right... So if banks aren't throwing themselves at this particular type of borrower to lend at a more favorable rate, I ask myself what the banks know that I don't.
Title: Re: Borrowers with >$20,000/month Income
Post by: AnilG on January 06, 2013, 08:08:06 PM
There are currently 14 loans available where borrower indicated monthly income greater than $20,000. Historically, such loans have much lower default rate and higher return on investment. So, I don't worry about someone claiming higher income and if it is not verified. As long as other factors such as mortgage, total debt, low credit utilization, and clean credit record line up, I will lend.
Title: Re: Borrowers with >$20,000/month Income
Post by: DanB on January 06, 2013, 09:41:04 PM
I saw one last month with income of $30000 a month...................verified!
Title: Re: Borrowers with >$20,000/month Income
Post by: mo on January 06, 2013, 09:53:33 PM
The LC borrower application asks for yearly income.  LC does the math to get the per month number they show in the loan offering to investors so these aren't careless typos on the part of people not reading carefully.
Title: Re: Borrowers with >$20,000/month Income
Post by: viking on January 06, 2013, 10:12:43 PM
If the income is correct at $37,500/month, for the example above, it is a little bit surprising that the borrower is not able to pay down his credit cards from his income alone and needs a loan from LC. His revolving balance is $33,894.00 and he is asking for $30,000.
Title: Re: Borrowers with >$20,000/month Income
Post by: yojoakak on January 07, 2013, 12:25:20 AM
Yes, you're right... So if banks aren't throwing themselves at this particular type of borrower to lend at a more favorable rate, I ask myself what the banks know that I don't.

Banks pay near zero interest on deposits and buy Treasury Notes and Bonds paying 1-3%.

It's guaranteed income and no headaches.

Why would they want to bother themselves lending money out to complete strangers?

http://www.bloomberg.com/news/2012-08-20/banks-use-1-77-trillion-to-double-treasury-purchases.html
http://www.treasurydirect.gov/RI/OFNtebnd
Title: Re: Borrowers with >$20,000/month Income
Post by: william on January 07, 2013, 05:21:31 AM
^^^ Very true.


Historically, such loans have much lower default rate and higher return on investment. So, I don't worry about someone claiming higher income and if it is not verified. As long as other factors such as mortgage, total debt, low credit utilization, and clean credit record line up, I will lend.
This is what I do.
Title: Re: Borrowers with >$20,000/month Income
Post by: Grant on January 07, 2013, 10:07:29 AM
Yes, you're right... So if banks aren't throwing themselves at this particular type of borrower to lend at a more favorable rate, I ask myself what the banks know that I don't.

Banks pay near zero interest on deposits and buy Treasury Notes and Bonds paying 1-3%.

It's guaranteed income and no headaches.

Why would they want to bother themselves lending money out to complete strangers?
All I can tell you is from personal experience.  I am an employed physician who graduated residency in 2002.  In the 11 years since training I have had banks tripping all over themselves to lend me money.  My DTI ratio excluding my mortgage is in the neighborhood of 10% and including my mortgage(s) is up around 50%.  I fully understand back in 2002-2007-ish how banks would be lending me money like crazy with mail solicitations.  However even now I still am actively solicited at least quarterly from institutions I don't have any prior relationship with.  I currently have two  substantial unsecured lines of credit --one has an interest rate of 3.875% and the second is at 5.25%. 

I really hope I am not coming across as arrogant because I genuinely don't mean to.  I'm just relaying my experiences that someone who is part of the "1%" may have something else going on that their local bank knows about that we, as complete strangers, are not privy to.  It's a head-scratcher that a loan at 10+% is a better deal than something that person could otherwise obtain and might be a warning of somethign else going on... what exactly that is, I do not know. 
Title: Re: Borrowers with >$20,000/month Income
Post by: lender_john on January 07, 2013, 11:34:53 AM
Some borrowers claim more than $20,000/month in income. See for example LoanID 3065326:
https://www.lendingclub.com/account/loanDetail.action?loan_id=3065326
who claims $37,500/month income.
It is probably an error (maybe should be $37,500/year) but it throws off the DTI ratio.

Do you invest in these type of loans?

As long as its verified income, absolutely. 
Personally I can't imagine myself needing to borrow to pay off cards if I made over 400k a year.
However these are generally good loans with low default rates.

Its not that difficult to imagine someone with a very high income.. who has over 350k in education loans.. high rent or mortgage costs..  very high childcare costs.. etc

It may not be a frugal lifestyle but people usually spend what they have, the more they have, the more they spend.
Title: Re: Borrowers with >$20,000/month Income
Post by: Grant on January 07, 2013, 02:54:34 PM
Quote
It may not be a frugal lifestyle but people usually spend what they have, the more they have, the more they spend.

Now that is the real truth!!!
Title: Re: Borrowers with >$20,000/month Income
Post by: LC420 on January 07, 2013, 05:30:12 PM
Citadel is also a pretty big hedge fund. So.. would not be all that mind blowing for this guy to make 35k+/month.
Title: Re: Borrowers with >$20,000/month Income
Post by: Grant on January 07, 2013, 05:38:33 PM
Citadel is also a pretty big hedge fund. So.. would not be all that mind blowing for this guy to make 35k+/month.

Conversely, it is mind-blowing that this "guy" can't take a loan out against his 401(k) at less than 16.29%+ 5% origination fee.  OK, fine... there are problems with a 401(k) loan assuming one's employer allows them... namely the requirement to pay them back when you leave your job. 

But I'll stick to my main point.  This person should have financial connections and somehow paying the interest and fees is more attractive than his other options???   ::)
Title: Re: Borrowers with >$20,000/month Income
Post by: rawraw on January 07, 2013, 07:27:37 PM
Yes, you're right... So if banks aren't throwing themselves at this particular type of borrower to lend at a more favorable rate, I ask myself what the banks know that I don't.

Banks pay near zero interest on deposits and buy Treasury Notes and Bonds paying 1-3%.

It's guaranteed income and no headaches.

Why would they want to bother themselves lending money out to complete strangers?

http://www.bloomberg.com/news/2012-08-20/banks-use-1-77-trillion-to-double-treasury-purchases.html
http://www.treasurydirect.gov/RI/OFNtebnd
It's much more complicated than that.

There is a ton of headaches involved with it, especially for small and mid sized banks.  First, the spread isn't enough for the average bank to pay it's overhead.  Then you are assuming interest rate risk at a time where Basel III wants to include unrealized losses on AFS securities in capital ratios.  In addition to this, you could get in regulatory trouble on the compliance side for Community Reinvestment Act.  And then you have the suppliers of the capital who are angry about their low ROE. 
Title: Re: Borrowers with >$20,000/month Income
Post by: yojoakak on January 07, 2013, 08:26:14 PM
Citadel is also a pretty big hedge fund. So.. would not be all that mind blowing for this guy to make 35k+/month.
There are about 10 companies named "Citadel" that show up on Google maps, including a carpet cleaning business.

The Borrower doesn't really specify which one he works for.

https://maps.google.com/maps?hl=en&q=Citadel%20near%3A%20NEW%20YORK%2C%20NY
Title: Re: Borrowers with >$20,000/month Income
Post by: rev on January 08, 2013, 10:29:24 AM
Or maybe he is "one of us", saves a big portion of those $35k every month, is just doing his due diligence before investing those savings in LC, and will pay off the loan right after it's issued.
Title: Re: Borrowers with >$20,000/month Income
Post by: yojoakak on January 08, 2013, 12:02:35 PM
Yes, you're right... So if banks aren't throwing themselves at this particular type of borrower to lend at a more favorable rate, I ask myself what the banks know that I don't.

Banks pay near zero interest on deposits and buy Treasury Notes and Bonds paying 1-3%.

It's guaranteed income and no headaches.

Why would they want to bother themselves lending money out to complete strangers?

http://www.bloomberg.com/news/2012-08-20/banks-use-1-77-trillion-to-double-treasury-purchases.html
http://www.treasurydirect.gov/RI/OFNtebnd
It's much more complicated than that.

There is a ton of headaches involved with it, especially for small and mid sized banks.  First, the spread isn't enough for the average bank to pay it's overhead.  Then you are assuming interest rate risk at a time where Basel III wants to include unrealized losses on AFS securities in capital ratios.  In addition to this, you could get in regulatory trouble on the compliance side for Community Reinvestment Act.  And then you have the suppliers of the capital who are angry about their low ROE.

It's not the banks fault. It's just that consumers apparently just don't want to borrow money:

(From the article) "“It’s a function of inherently weak demand for loans and that relates to inherently weak demand in the economy,” he said. “Consumers, households, businesses: they’re paying down debt, they’re saving money, they’re not borrowing. They don’t have an appetite.” "
Title: Re: Borrowers with >$20,000/month Income
Post by: OrthoInvest on January 12, 2013, 08:54:11 AM
About a month ago, there was a verified income of over 200,000 per month...

I just shrugged it off because it was errors all around and looked at the other stuff.

 :D
Title: Re: Borrowers with >$20,000/month Income
Post by: DanB on January 12, 2013, 08:29:11 PM
How do you guys like this one?

https://www.lendingclub.com/browse/loanDetail.action?loan_id=3098755&previous=browse
Title: Re: Borrowers with >$20,000/month Income
Post by: rawraw on January 12, 2013, 09:23:39 PM
How do you guys like this one?

https://www.lendingclub.com/browse/loanDetail.action?loan_id=3098755&previous=browse
I thought of this thread when I saw this note.  You guys can rely on historical info, but I'm not touching notes like that.  IMO, that's when you start forgetting that analysis of historical data can only tell you so much ha ha
Title: Re: Borrowers with >$20,000/month Income
Post by: AnilG on January 12, 2013, 09:44:15 PM
How do you guys like this one?

https://www.lendingclub.com/browse/loanDetail.action?loan_id=3098755&previous=browse

The Lending Club Grade B4, FICO score in 6xx, Rent, clean credit record lead me to believe that it is typo or most likely annual income entered as monthly income. Even with mis-stated income, loan doesn't appear that bad. The loan amount is close to total debt.
Title: Re: Borrowers with >$20,000/month Income
Post by: aptosca on January 12, 2013, 11:28:27 PM
Or maybe a decimal got missed: 20K/yr rather than 2M/yr.
Title: Re: Borrowers with >$20,000/month Income
Post by: nonattender on January 13, 2013, 01:23:44 AM
Imagine if the technology existed to pre-format a field such that a user's input was required to conform.  Oh, wait...   ::)
Title: Re: Borrowers with >$20,000/month Income
Post by: DanB on January 13, 2013, 03:11:25 AM
Imagine if the technology existed to pre-format a field such that a user's input was required to conform.  Oh, wait...   ::)

Yeah, really huh.  :)
Title: Re: Borrowers with >$20,000/month Income
Post by: breitenm on January 15, 2013, 01:53:41 AM
I avoid loans that state an income >=$20k. I assume that these folks are self-employed and naturally there my be a huge variance in their monthly income.