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Topics - Fred93

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1
Investors - LC / LC new interest rates Aug 2019
« on: August 07, 2019, 08:22:02 PM »
As investny pointed out in the other thread, LC has changed interest rates again, only 1 month after the last change.



An unusual change.  Only D rates were changed.  It really looks like a fix for mistakes made last month.  One of the odd things about last month's rates was that C5 and D1 bumped into each other, having almost exactly the same rate.  This month's change has D1 moving up away from C5.  .. and some smaller changes in D2, D3, and a tiny change in D4.

2
Investors - LC / LC new interest rates July 2019
« on: July 09, 2019, 05:31:17 PM »
LC adjusted their interest rates as of 7/6/19, and has announced that there will be no more E loans.  (They had previously killed off F&G loans tho they continued to publish interest rates for these nonexistent loans, so I plotted them.)

I've updated my interest rate charts.  Here is the recent history of LC interest rates vs time...


You can see that they've discontinued E, and spread out the D interest rates to cover the territory previously occupied by E loans.  A few years ago when they were pushing for volume, they degraded the quality of E,F,G loans so that they were no longer a good investment.  D loans are more like what E loans were a few years ago. 

They also increased (a little bit) the interest rates in B and C. 

One bizarre detail...  They did not increase the D1 rate.  C5 and D1 are now almost exactly the same rate.  This looks very strange, but there is a clue.  Note that the D1 rate has been stuck at 17.97% for the last few update cycles.  That's just barely below 18%.  My guess is that there is some state with an 18% limit, and they're holding back on D1 artificially to keep it under the limit. 

Another way to look at this data is to draw curves vs grade.  Its difficult to follow which curve is which, but the most recent yellow curve sticks out clearly.  The D1 kink also sticks out clearly.

4
Investors - LC / LC loan quality shift April 2019
« on: June 04, 2019, 05:01:45 AM »
Starting in the first few days of April 2019, I am suddenly unable to reinvest the loan payments being deposited in my account.  Cash is piling up.

The cause of this is a shift in the notes that LC is offering.  I invest via the LC API in both whole and fractional notes.  The total number of loans LC is offering these days is lower than it has been in the past, and the quality has shifted.  Very few notes now meet my criteria.  I bid on all of the ones that do, and win a significant fraction of those I bid on, and yet cash keeps building up in my account.

I complained to LC.  Told them they were driving customers away.  They denied it.  The usual "You are very important to us." nonsense. 

As a result of this, I've been transferring money out of my LC account.  Does no good to keep it there if I can't invest.

I have loosened my filters a bit, but this has not produced any significant improvement. 

I told LC they are driving retail customers away.  They deny it.  ...but it's true. 

My theory is that as their business shifts to mostly one of selling packaged products to banks, they are intentionally ramping down the note business.

5
Investors - LC / LC increases interest rates 11/8/2018
« on: November 09, 2018, 02:22:49 AM »
This time the increases are only in A and B grade loans.  Correct direction, but change is too small.

Each line is one grade.  The dots on the bottom line mark the dates that interest rates were changed by LC.


6
General P2P Lending Discussion / FICO score inflation
« on: October 22, 2018, 12:05:07 PM »
This image appeared recently in the WSJ. 

What do you think about this?  Does it show that US borrowers have all been getting a lot better during the last 8 years?  Or does it show that FICO scores have been inflating for the last 8 years?

I believe it is some of each.  The chart starts at the time of the financial crisis, when lots of people were having some trouble, and just about everything has gotten better since then.  However, we know that there was some difficulty in borrower-land in 2015/6 because we saw huge dips in performance of LC and Prosper loans, and also dips in performance of subprime auto loans.  That certainly is not indicated here.

7
Suggestions / search for all messages from a particular member
« on: September 11, 2018, 06:54:56 PM »
Is there a way to do this?

8
SCMP is South China Morning Post, a well-respected English language Chinese newspaper.

https://www.scmp.com/news/china/economy/article/2159372/china-comes-10-measures-tackle-risks-troubled-p2p-lending-sector

https://www.scmp.com/tech/china-tech/article/2156832/chinese-peer-peer-pioneer-defends-industry-after-wave-defaults
As many as 114 P2P platforms failed from July 1 to July 24, with 14 shutting down without warning, 97 suspending fund withdrawals after facing liquidity problems, and three under official investigation, according to online P2P data provider Wangdaizhijia.

https://www.scmp.com/business/companies/article/2155839/shanghai-savers-sound-alarm-more-p2p-lenders-fail-return-funds

https://www.scmp.com/business/companies/article/2155357/investors-left-rue-losses-fraudulent-chinese-p2p-lenders-collapse

https://www.scmp.com/business/banking-finance/article/2158533/police-thwart-protest-rallies-victims-chinas-underground

An unknown number of Chinese investors who have lost their life savings in the country’s peer-to-peer (P2P) lending industry mounted a failed attempt at a demonstration before the banking regulator on Monday, amid heavy intervention by the police in Beijing’s financial district.

Hundreds of uniformed police, ancillary police and plain clothes officers patrolled several city blocks around Finance Street, where the central bank, as well as the regulators for stocks, banks and insurers are located.

Alex Li, a 35-year-old organiser of the demonstration, said disgruntled investors from all corners of the country had gathered in the capital city over the weekend to petition the central government.

“At least 8,000 investors have made it to Beijing,” Li said by phone from Beijing. The number could not be immediately verified.

Hundreds of investors had attempted to gather outside the head offices of state agencies on Monday, including the China Banking and Insurance Regulatory Commission (CBIRC), to press for an official investigation into the suspensions of fund withdrawals in more than 100 lending platforms last month,


9
Investors - LC / LC interest rates updated 5/8/2018
« on: May 08, 2018, 09:49:20 PM »
LC adjusted interest rates today, but the adjustments are shockingly TINY and therefore meaningless.  Can you believe they increased some rates by 0.12% ?   ZERO POINT ONE TWO.  You can just barely see this on the chart if you look really hard. 

The 8k filed with the SEC today describes it this way "Effective May 8, 2018, interest rates on the LendingClub Corporation ("LendingClub") platform have been updated. The changes are an increase of 0.12% for loan grades A2-A5, 0.15% for loan grades B1-B5, and 0.45% for loan grades C1-C5."

My updated chart...


The red dots on the A1 line are just there to highlight the dates at which LC made interest rate changes in any grade.

10
Investors - LC / LC loan performance not getting better
« on: April 03, 2018, 05:02:45 AM »
I want to begin with LendingClub's most recent statements about loan performance, then show you recent data, and let you decide whether LC's statements are reasonable or misleading.

From the 10K for the year ended 12/31/2017,
Quote
The loans originated between the second half of 2015 through the third quarter of 2016 continue to season and are charging off at higher rates than loans originated in prior vintages.

I agree.  Thank goodness they finally said that.  I've been saying it for awhile now.
   
Quote
The increases in charge-offs were partially offset by the following...

The effect of credit tightening implemented in late 2016 and early 2017.  As the fourth quarter of 2016 and first quarter of 2017 vintages are beginning to season we are seeing improved loss performance vintage-over-vintage compared to the second and third quarter 2016 cohorts as a result of the tighter credit criteria after normalizing for the impact of natural disasters.

Improved loan performance you say?  I'm listening.

This is technically correct.  4Q2016 and 1Q2017 chageoff rates have been coming in a bit lower than 3Q2016.  However, first I think the elephant in the room is that 3Q2016 is a really bad benchmark.  It was worse than each of the proceeding 28 quarters!  We're nowhere near where we were say a year earlier.  Things are still bad.  Ok, so some numbers ticked down, but the numbers are noisy, so I'm not sure there's anything to celebrate there.  While I'm at it, I don't think there's any evidence which can be used to substantiate the claim that this little tick down was due to the credit tightening LC implemented in 2016 and 2017.  That's speculation.

Although this document reports on events thru the end of 2017, it was filed on 2/22/2018.   Just a little more than 1 month later, on 4/1/2018, LC published the March 2018 chargeoff file.  I've charted some data from this file.

As you may recall, I'm plotting the fraction of loans which have been charged off at each month during a loan's life.  This data is usually charted in the form of "vintage curves" with one curve for each vintage of loans, and a horizontal axis which is the age of the loan.  Those charts make comparisons difficult, so I flip things around.  I plot one curve for every loan age, and the horizontal axis is the loan vintage.  On these curves, if every vintage behaved identically, all the lines would be horizontal.  If the curves go up at the right end, each new vintage behaving worse than the one before.  If the curves go down at the right end, each new vintage is behaving better than the one before.



The earliest month in a loan's life that is interesting is month 5.  That's because loans have to be 1 month old before the first payment is due, so can only become 4 months late (which makes them subject to chargeoff) at month 5.  I've shown the chargeoff fraction at months 5,6,7,8,9,10.   I don't show later months because they don't give us information about recent vintages.  (Only loans from old vintages have lived long enough to provide data for these later months.)

With all that in mind, lets look at the curves.  You can see that Q3 of 2016 was the worst quarter in recent memory, and the subsequent quarters 16Q4 and 17Q1 did indeed come in better, as the Lendingclub text above describes.  However, that  little downward trend was pretty much undone by the tick up that we now see in the 17Q2 data. 

Only 4 of these curves have data for 17Q2 because that's all the data that is available.  One more month's data will be available next month, etc.  However, the four months we can see are consistent with one another.  17Q2 is the second worst vintage in recent memory, second only to 16Q3.

Stand back and look at this chart.  Does it look to you like performance is getting better as we move to the right (into newer vintages)?  No it does not.

Although LC has thrown lots of words around in blogs and SEC filings, the data simply doesn't show that recent changes in underwriting (or anything else) has improved loan recent vintage performance.  The curves still look like they're gong up as they move to the right

This combined with the fact that LC stubbornly refuses to increase interest rates, makes the outlook grim.


11
Investors - LC / LC interest rates updated 2/20/2018
« on: March 30, 2018, 01:09:40 AM »
LC updated interest rates on 2/20/2018, so I've updated my chart...


Changes this time are minor.  The entire D group made a small move up.  All of A,B,C went down by 0.01%.  Thes minor changes give the impression that some people who don't really understand things are turning cranks and simply rerunning old analyses as they were taught years ago.

A1 went DOWN from 5.32% to 5.31% ! 

Meanwhile, as investors know, returns on investment in LC loans are way down, because default rates moved up in 2015 and have never recovered.  Also market interest rates move up day by day.  3 month LIBOR is now over 2%. 

12
I buy notes on Folio, using the API.

When I place a buy order on Folio, the responses I get are a mix of NOTE_NOT_AVAILABLE and SUCCESS_PENDING_SETTLEMENT.

I'm going to be talking about just those orders that resulted in SUCCESS_PENDING_SETTLEMENT.  Those are the ones I think I bought.

A significant fraction of those never end up in my account.  I've been wondering why.

A few months ago I took a day's purchases, from the log written by my software, and checked them against my notes file to see how many actually arrived and how many did not.  I got a 50% failure rate!  Yipes.

I did this check again last month, and got a 38% failure rate.  38% of the time, the note does not show up.  (For the purposes of this little experiment, 38% and 50% are approximately the same number.)

I've written to LC a couple of times about this.  Most recently their response has been that the specific examples I sent them were all cancelled by payment.  I have quizzed them about the payment timeline, and how they decide which orders to cancel.  They say that the window of opportunity for payment after I place an order is only one day.  That would be 1 day out of about 30 days (because payments come about once every 30 days), so that would be 3.33% expected to fail.  But of course they only process payments on weekedays, so one of the 5 weekdays absorbs the hazard of the two weekend days, so maybe that would legitimately get them to 4.66%

Long way from 50%.

So I'd like to hear the experience of other LC folio buyers.  I'd like to know if I'm alone in this.

What fraction of successful orders fail to arrive in your account?

Do many of you see a large fraction of buy orders cancelled, ie say SUCCESS when you place the order, but it never makes it to your account?

LC is asking me questions aimed at a theory that my selection process accurately predicts who will pay on the day I order.  I've looked over what I'm doing, and I just don't think that's possible.

PS: Jheizer made a brief comment in another thread that he had seen "like 50%" failure.  I can send that to LC, but I'd prefer to send comments from several different people, showing that many people have similar experiences.  That will allow us to get past their theories that this is caused by some strange thing I'm doing.

14
Suggestions / new forum bug - stale "new" indicators
« on: October 20, 2017, 04:54:12 PM »
Starting yesterday or the day before ... Now the "new" indicators on forums are stale.  Sometimes I've already read the recent messages, yet the forum still shows the icon for new messages available.  Note that if I refresh the page, IT IS STILL WRONG.  About a minute later, a refresh will make it right.

Used to work perfectly.  Did you update the forum software recently?

15
General P2P Lending Discussion / consumer distress
« on: June 03, 2017, 06:27:17 PM »
Article in Barrons today. 

http://www.barrons.com/articles/the-surprising-threat-to-the-american-economy-1496463255?mod=BOL_twm_ls&tesla=y
Quote
For some time now, Stephanie Pomboy of MacroMavens has highlighted the accumulating stress on consumers. “People who save are those who have the wherewithal to save,” she says, “while poorer consumers are borrowing out of distress to fund purchases normally paid for by income.”

The fact that delinquency rates are starting to turn higher “across all segments of the consumer space, despite near record-low interest rates, is a powerful indictment of the strong consumer narrative so widely embraced,” Pomboy says. How can folks have trouble paying their debts with unemployment at 4.3%, mortgage payments low, and net worth at record highs? “One shudders to imagine what delinquencies would look like if rates actually did move up, or—heaven forbid—stocks went down,” she adds.

When Stephanie Pomboy speaks, I  always listen. 


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