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Messages - cfb

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Investors - LC / Re: New Sign In Window
« on: June 10, 2017, 11:44:06 AM »
The account transfer page has also changed to become more annoying, different and require more clicking to work.

I remember when Yahoo first started circling the drain.  Their "innovation" became changing the look and feel of pages to make it "easier".  All that did was make me have to pay more attention to what I was doing, make things more difficult or make them less familiar with zero benefit.

Investors - LC / Re: Deadbeats
« on: February 22, 2017, 08:58:12 PM »
I've actually had quite a flurry of those, 0-4 payments and then bankruptcy and it was across all credit grades.

It was funny, I said the word 'deadbeats' in an email to lending club (this was maybe 3.5-4 years ago) and the guy totally flipped out, insisting that I not call them that because LC doesn't pass through any "deadbeats".

Investors - LC / Re: Discover getting into consumer loans
« on: September 10, 2014, 04:54:05 PM »
Now that's rationalization if I ever heard it.  Borrowers screw us, so now suddenly it's ok to commit a crime against a whole different company.  Brilliant.

Hey, where would we be without a good rationalization once in a while?

However, in the land where people haven't lost their minds, this isn't even remotely fraud or criminal.  Its a matter of contractual law, not criminal.  Should they somehow find out you didn't buy/refinance a car with the money, they could say you're in violation of the contract and ask you to pay it back immediately.  My 2c is that as long as you make a payment every month nobody is going to care at all.  If they did, they'd want to get a copy of the paperwork on the car sent to them.

All the bank cares about is two things: you're a good credit risk and you pay back the loan.  If I lent 30k to someone for debt consolidation @22%, they spent the entire thing on lemon popsicles, and paid all 60 payments on time and in full, is anyone going to complain?

Investors - LC / Re: When are deadbeats reported to credit agencies
« on: September 08, 2014, 05:28:42 PM »
Just don't mention the word 'deadbeats'.  I had an LC guy get all offended when I used that term regarding people who stop paying on a loan.  :D

Investors - LC / Re: Convenience Check Arbitrage
« on: September 08, 2014, 05:20:59 PM »
If you own a car with no loan on it or have a car with a higher blue book value than what you owe on it, then it might be a legit finance or 'refinance' of the vehicle.  It'd certainly be a more legit usage than what the majority of our LC loans actually get put to vs what they say they're going to use it for.  If LC doesn't check to see if you paid down loans or credit cards with your LC loan, not sure how these guys would check into how you spent your lightstream loan.

That having been said, a <2% unsecured loan seems to land on the too good to be true button.  That's below the rates for a secured heloc.  I could see that rate on a dealership financed loan where the dealer or automaker is subsidizing it.  There's a catch.

Investors - LC / Re: LC vs Stock Market, a View from the Rear View Mirror
« on: September 06, 2014, 05:30:40 PM »
Couple of tidbits...

LC debt is going to be considerably more risky than a high yield corporate junk bond fund.  Defaults on most of those are nowhere near the default rates of LC loans, and you've got a good chance of at least a partial recovery on defaulted corporate debt.

Risk of loss vs risk of volatility are two rather different animals.  Unless the company you own stock in goes bankrupt, a market crash can be erased by waiting for the prices to recover.  In an LC loan, your money on a default is gone.  Waiting a while won't fix that.

Comparing unsecured loan income to equities during a period of high persistent stock market price increases and at a low period for interest rates is like comparing apples to squid.

Risk of correlated losses is a big problem.  Should we fall into another economic hole in the ground like 2007/2008, the stock market will drop and you'll see a bananas number of LC defaults as people lose their jobs or reprioritize which bills they're going to pay.  Although a stock market drop in the absence of a serious economic problem/job losses shouldn't affect LC loans that much.

I've been an LC investor for largely a couple of reasons.  Aside from equities, you can't make a decent risk adjusted return on just about anything and that'll stay that way for a while.  I needed steady income for about three years from a 60k lump of cash I didn't want to put into equities.  I wanted to make at least 5% on that lump of cash.  I'd normally buy a high yield bond fund if a good one had an 8-9% return, but they're paying half that.  I'd buy some 5-6% cd's, but the last time I could do that was 7 years ago.  I'd rebalance my 95% equities portfolio into a 60/40 or 50/50 with high quality corporate debt if I could get a 4%+ dividend out of that, but I'd get about 1/3 of that payout and bonds are going to get punched in the face when rates go up, so that'd be a mistake.

I says I've *been* an investor because the game now is a lot different than it was a couple of years ago.  I could never deploy 60k into this product now and get the ~10% returns I've gotten if I started today.  And I wouldn't take on the risk of lending unsecured money to strangers on the internet who clicked a banner ad for LC for <10%.

Investors - LC / Re: Entertaining listings
« on: September 03, 2014, 04:58:54 PM »
Here's what the LC rep told me when I pointed out that a particular borrower had a low revolving # but the fine data showed a six figure debt ex mortgage.

"Some points I have had clarified:

1) total_bal_ex_mort can include a home equity line
2) mort_acc includes all mortgage accounts in the credit file history (including those that have been fully repaid)

That might help to put more perspective on it.  The four columns to the right of the table are the best indicators of current exposure the borrower has."

So in that instance the revolving credit # doesn't include helocs (drawn or not) and one has to go to the download data and look at the total_bal_ex_mort column, or whatever its called these days.  That exchange was about a year ago and I know the data columns change.

I had found quite a few people that looked like dandy borrowers if you didn't look at the download data, at which point many borrowers looked horrible.  The one I inquired about was an A5 borrower with almost no revolving debt, a low DTI, and plenty of income.  But he owed 200+k on his heloc and had a big mortgage and neither was on the basic front page, included with the revolving debt, or included in the dti figure.

Investors - LC / Re: Entertaining listings
« on: September 03, 2014, 04:08:53 PM »
Out of a possible 999 in my scoring system this one scored a record low -158 (minus 158) and it looks even worse when I check the detail. How its nearly fully funded in 10 minutes is beyond me. I don't get it!

Everything sells, at least almost everything.  And LC's loan quality seems to be declining.  But I was thinking about this and looked at it from their perspective.  If they list a loan and it doesn't sell, doesn't hurt them a bit.  If it sells they get their percentages whether the loan defaults or not, and a larger fee these days for collections.  Only real problem is if their default rate flies through the roof, it may put off investors.  In the meanwhile, higher and higher loan, borrower and lender volumes look pretty good for an IPO and those pesky defaults will happen later.

Investors - LC / Re: LendingClub Files S-1 with SEC
« on: September 03, 2014, 04:05:33 PM »
LC not making money is fine - lots of companies do it, see Amazon; need to pay attention to why. I think LC is in good shape in this regards. Prosper is also profitable, but it behooves them to reinvest it all and a little extra (to not make a profit) to continue to build their business (and you know, maybe fix it so their accounting works right)

Amazon isn't losing money at least only to the extent they want to.  They plow their profits into R&D, warehouse upgrades and new warehouse deployments.  A lot of people miss that part.  Its a little different than running a low margin business and failing to make up the difference on the volume.  I remember in the mid 90's amazon turned a profit and Bezos was pissed about it.  He called it a 'mistake'.

Investors - LC / Re: Entertaining listings
« on: September 03, 2014, 03:58:03 PM »
I didn't look at the fine data detail, but I'm not surprised about the 11 mortgages.  However you slice it though, he's into 324k of debt.  I thought HELOC's weren't included in the revolving debt part?  Could have sworn I asked that of LC and was told that HELOC's didn't appear in the standard screen info.

And it does make the DTI weird, but I know HELOC's aren't included in the DTI, I asked that question as well.

He didn't fly through my filters, because I have a max revolving credit of 50k.  Something I read in a 1000 year old guide on village lending that the lenders wouldn't loan money to someone already too deeply in debt.  If you help someone else make their bad problems worse, eventually they become your problems.  However, there are a lot of loans with 50-200k in revolving debt but would pass most of the common standard 'simple' or 'high income' filters.

Here's the real problem with the guy.  He's a landlord with 11 properties in or near Norco California, and as a service manager for a car dealer with a low six figure income, he's pretty dependent on that property income being persistent.  Norco is subject to wildfires and is in a significant earthquake zone.  Its also literally a horse town...there are few roads and most people get around by horse.  So in the event of a prison break, fire or earthquake, emergency services would be hard pressed to get into the area let alone do anything about it.

The primary employers are the nearby prison, a naval base and the local schools.  So the tenants are school teachers, sailors and prison guards.  In an area of 400k-600k average homes.  Ridiculous foreclosure rates.  I'm guessing he's been buying the foreclosures and fixing them up.

Huge accident waiting to happen...especially in this time of super dry drought conditions.

Investors - LC / Re: Loan Information Asymmetrical Timing
« on: September 01, 2014, 04:22:49 PM »
I was just repeating your question (not asking it), and I thought I'd excessively explained why they would be front loaded rather than evenly distributed.

The short answer is if you're borrowing tons of money after clicking on a banner ad, there's obviously something less than great going on.  But your credit report may not reflect what it is.  And chances are either whatever is going wrong that required the loan or the burden of the loan itself is going to result in the borrower not repaying and perhaps going bankrupt.

Investors - LC / Re: Entertaining listings
« on: September 01, 2014, 04:18:22 PM »

I'm pretty sure this guy is an award winner in the category of "How much revolving debt again...?"

Can't believe LC approved this AND its going to fully fund.

Investors - LC / Re: Loan Information Asymmetrical Timing
« on: September 01, 2014, 02:36:33 PM »
As I pointed out earlier, bankruptcies and other defaults owing to "materially destructive life events" without "intent'"which you argue might constitute 60-80% of all defaults and which would be undiscernible from credit data, should certainly distribute themselves evenly over the life of all loans. If you are correct and the majority of defaults occur early in the life of loans (I think we all know that is true?) then it can't be that a large fraction of them are the result of sudden, unexpected, materially destructive life events that hadn't already happened or begun before the loan was taken.

Your thoughts?

Why aren't they evenly distributed?

I'm betting a fair number of early loan cycle bankruptcies know they're in serious financial trouble and are planning on using the LC loan hoping to recover or at least put off the bankruptcy until they can think of something else.  So that tilts the table towards the early part of the loan.  Problem is, what's wrong or is about to go wrong may not show up in the data we get to see.  When you see lots of inquiries, very high revolving debt, extremely high dti or lates/defaults you've got the sign.  I don't buy those loans, and yet see perfectly good loans bankrupt within a year or so, often just a few months.

In medical cost bankruptcies they've been really sick or injured recently, probably with lost time on the job, or they're about to go into a possibly risky medical procedure.  So they might die, not be able to get back to work, or be overwhelmed by the costs.  Someone like that might present themselves as a credit card/debt consolidation vs medical, have good looking numbers, and just went to LC first so don't have the inquiries/lates yet.  Unexpected medical issues during the loan would of course be evenly distributed within a demographic class.  Health and hazardous behaviors tend to be more common within the low income/financially stressed end.  So a G should experience more of them than an A.  Its just a question of which G will experience it.  Which you won't figure out with backward looking data.

Divorces...most of them are due to money/financial/health.  I'd imagine that someone looking to borrow $35K is experiencing one of those problems.  If borrowing the money doesn't fix the problem and/or the monthly payments are burdensome then you have a  higher early term likelihood of divorce.  Much of the rest of the reasons have to do with discontent.  I'm thinking a four figure monthly payment digs into the lifestyle a little.  So of course the same lower income, higher financial problem folks will see more of this type of bankruptcy than high income, higher educated people.  The distribution within finance bands should be spread out but I'm looking at the loan as a correlated factor and perhaps causative. So avoiding low income loans helps cut into the curve.

There's also what I'll call the pseudo-bankruptcy.  Its when after paying their mortgage/rent, car payment and utility bills they find they don't have enough to meet their other obligations.  Their largest monthly bill that doesn't result in being homeless or having something turned off is their LC bill.  If they pay that, they have to skip paying 6 other people and getting 6 delinquencies or skipping the LC loan payment and getting 1.  In this case the borrower did the same things a bankruptcy would do: allocate assets towards secured loans and essential bills, stiffing the unsecured loan.  Another pseudo bankruptcy is from people who die and don't have much in the way of assets or immediate family that wants to process a bankruptcy or send in copies of the death certificate when a bill shows up.

I think if you avoid loans with low FICO's, low income, high inquiries and dump notes that experience sharp FICO drops you improve your chances of avoiding default.  I don't think you'll find enough high F's and G's that have a high FICO, high income and no inquiries to matter.  Aside from that small improvement I think your risk adjusted returns will be substantially similar.  The big improvement on returns is not buying A's, B's and most C's.

Getting slightly back to topic, we have a limited range of notes to buy.  Analysis of the notes is limited because filled notes don't make the data dump file.  Institutional investors can process and buy up the notes worthwhile to buy, up to the limit and deployment rate of cash they have.  Part of the problem is building filters against 100% of the data when we're only going to have legit access to <50% of the notes.  Filtering just shortens the time you have to buy and the longer the wait the poorer the quality of notes you'll be choosing from, simply because the hordes of borrowers didn't want them or thought they'd do better spreading out their deployment over longer periods of time.

Be interesting to see a returns analysis on just notes that made the data dump with and without the well accepted filters vs all notes.  I'd bet that there is quite a returns gap between what gets snapped up before any of us get a chance and the dregs left over, and not much delta in filtered vs non filtered.

I also did an analysis a while back and found that buying C4-E2 notes with no filters gave a very similar long term return to a filtered D-G strategy, (about 1% or less difference) but offered more than enough notes on a regular basis to build and maintain a portfolio.  So given the need for speed vs quality analysis, folks might look at that.

Investors - LC / Re: Loan Information Asymmetrical Timing
« on: August 31, 2014, 12:13:02 PM »
And I don't think the backward looking data analysis is worth beans.

How do you think people came up with the list of "the 5 top reasons for bankruptcies"?

Not by looking at lending club data  :)  IIRC the data was compiled by voluntary surveys of people when they were declaring bankruptcy.  Clearly nobody does this because they want to, circumstances just dictate that they have to.  While people bad with money might telegraph a likely impending bankruptcy via lates, inquiries and derogatories I'd imagine there are quite a few people who do whatever they can to keep paying the bills.  The problem for us is when an LC loan is the last thing they can try before the merry go round stops.

I have A's and B's who declared bankruptcy that are 700+, no defaults, no lates, no problems.

And again, it all hinges on whether borrowers and lenders are largely the same sorts of people now as they were in each year the data was collected.  My recollection is quite a few iffy loans didn't get funded 2+ years ago.  Looks like almost everything gets funded these days.

Investors - LC / Re: I got my first ever "recovery" payments today.
« on: August 29, 2014, 04:01:58 PM »
I got $35 worth this month.  Three months in a row I got a big stack of them on the same day without hardly any in prior months.

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