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Topics - Fred93

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1
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.

2
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.


3
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%. 

4
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.

6
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?

7
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. 


8
NSR Invest / nsrplatform backtesting error messages
« on: May 21, 2017, 05:32:41 PM »
nsrplatform LC backtesting has been very difficult to use for last several weeks due to these error messages, which I presume are some sort of timeouts within your servers.





When one of these appears, I click "update results" to try again.  Error then often occurs a 2nd time, etc. 

9
NSR Invest / Prosper back testing
« on: May 21, 2017, 04:33:16 PM »
The Prosper data in nsrplatform seems to end 2016-06-30. 

Do you plan to update the data? 

10
I've never really done a long term Prosper vs LC comparison of returns before, and its about time so...



I've computed my monthly returns the simplest possible way.  I took month-end account value divided by prior month-end account value, minus one, and multiplied it by 12 to annualize.  When I added money during the month, I treated it as if it was present the entire month, which adds a small negative bias to the resulting numbers.  This occurred during several months in 2015.

First thing I notice is that the Prosper returns are more volatile.  They really jump up and down.  Some of this is expected, because my Prosper account contains fewer loans than my LC account.  On the other hand, that odd month up, even month down pattern in the last year is very strong, which may indicate something about how Prosper processes chargeoffs.  It is what one might expect if they processed chargeoffs every other month, for example. 

For comparison, I've shown the Orchard Index on the same chart.  http://www.orchardindexes.com

Some big picture thoughts...

I was amazed to see how closely my returns matched between Prosper and LC.  I use a similar loan selection strategy on both platforms.

I am happy to be beating the Orchard Index consistently.  The limitation of the Orchard Index is that they don't tell us what P2P companies are in the index, or their weightings.  I presume that both LC and P are in the index, but there's no way to be sure.

We're all moving to lower returns.

11
Suggestions / web server problems
« on: May 06, 2017, 12:20:18 PM »
During the last 24 hours, I've had quite a few forum pages intermittently take >30 seconds to load, and also some error messages, including...

Resource Limit Is Reached
The website is temporarily unable to service your request as it exceeded resource limit. Please try again later.

and

Service Temporarily Unavailable
The server is temporarily unable to service your request due to maintenance downtime or capacity problems. Please try again later.
Additionally, a 503 Service Temporarily Unavailable error was encountered while trying to use an ErrorDocument to handle the request.

13
Investors - LC / When will LC next raise rates?
« on: April 07, 2017, 06:43:46 PM »
I'm gonna run this for 23 days, which I presume makes it end on Apr 30.  I will end it sooner if LC raises rates before then.

14
General P2P Lending Discussion / stacking
« on: March 19, 2017, 09:53:22 PM »
We've discussed stacking before.  (This is the practice of applying for multiple loans within a few days or even hours, so fast that the credit bureaus aren't updated, and the 2nd, 3rd, 4th... lender is unaware of the prior loans.)

Nice talk on stacking at Lending 2017.
http://www.lendit.com/usa/2017/videos/combating-loan-stacking

I've seen articles on this subject before, but this is the first I've seen someone present actual statistics.

PS: Like most talks, this guy is "selling", so make use of the speech speedup feature.  Click on the little gear, and then "speed" and select 1.25x.

15
Investors - LC / The identiy fraud repayment promise
« on: March 19, 2017, 09:38:50 PM »
Lending Club promises to buy back loans (notes) "where the loan was obtained as a result of identity theft or fraud".

From the LC investor agreement...
https://www.lendingclub.com/info/lender-agreement.action
Quote
4. Limited Repurchase Obligation for Identity Fraud. If the Member Loan designated for the proceeds of your purchase of a Note was obtained as a result of identity theft or fraud on the part of the purported Borrower Member, we will (a) provide notification either directly or indirectly to you as soon as reasonably practicable upon our becoming aware of such a situation; and (b) repurchase your Note by crediting your account for the outstanding principal balance of your Note. For the avoidance of doubt, (i) if you purchased the Note indirectly through a third-party platform or entity, we will work with such third party to credit your investment account through that entity or platform for the outstanding principal balance of your Note, and (ii) if you purchased the Note through FOLIOfn Investments, Inc., we will credit the Lending Club account that you established in order to purchase Notes through FOLIOfn Investments, Inc. We may, in our reasonable discretion, require proof of the identity theft, such as a copy of the police report filed by the person whose identity was wrongfully used to obtain the fraudulently-induced Member Loan, before we credit your applicable account and repurchase your Note. You agree that you will have no rights with respect to any such Notes except the crediting of the purchase price to your applicable account

Here's the thing that bothers me.  Since 2009 I have bought 8399 notes from Lending Club.  (I bought some before 2009 too, but I don't know how many, because they aren't included in my notes file any more.)  Given that I have bought a very large number of notes, how come I don't recall LC ever notifying me of an identity theft note?  Not even once!

How can this be?  I figure LC is pretty good at weeding out identity theft, but there are people who work at it all day long every day.  There was one talk at Lendit where the speaker talked about massive amazon cloud driven identity theft attacks on lenders.  Wow.  So even if LC is very very good at weeding out ID theft, one would imagine that a few still get thru.  If so, then some fraction of notes we buy from LC must be ID theft notes, and ID theft notes will surely charge off, which concerns us, right?

If even 0.1% of LC notes are ID theft, then out of the 8399 notes I have purchased, there would be about 8 ID Theft notes, right?

Why have I never seen one?

Perhaps LC has been notifying me, and I've been ignoring the notifications somehow.  So I'll ask the rest of you...

Have you ever been notified by LC that a note you have purchased is an ID theft note? 

Ever had such a note repurchased?

If none of us have ever been notified or reimbursed, then there is something wrong, because I refuse to believe that 1.3 Million loans have been issued without a single case of ID theft.

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