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Messages - SLCPaladin

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Thanks for compiling this Rob. I have always appreciated your thoughtful posts, along with Fred's. I have gone from about $125k in LC investments and I am now down to $20k. I wish LC had raised their interest rates enough so that ROI was high enough across all grades, but the difference in returns that I think I will get in returns between risk-free CDs (I recently opened up a 4% 5-year) and LC notes is not worth the risk premium, especially considering tax treatment. I still want to believe in LC, but I haven't deployed any new money for a very long time. I'm open to the possibility of doing so, but I would have to see the facts on the ground justify it.

Investors - LC / Re: LC increases interest rates 11/8/2018
« on: November 09, 2018, 12:44:42 PM »
Too small indeed. I just saw that the highest yielding NCUA CD is at 4% for a 5-year term.

Investors - LC / Re: Is LC no longer interested in retail investors?
« on: October 08, 2018, 01:11:05 AM »
There was a time when I had $100k+ in LC and Prosper. Now I'm down to about $20k as I let things run off. I think there are other long-time investors that are still using their special sauce to try and juice returns. I just don't have the time or expertise to try and outperform. My best CDs these days are paying 3.63%. Hard to get excited about the return with LC and Prosper once you take into account the tax penalty. They have been slow to increase rates and I've been frustrated that LC's business model derives the bulk of their revenue on the loan origination. This means that they care less about the loan performance over time than the investors. Not sure what LC could do since they have competition from other sources, like Goldman Sachs's Marcus platform. Maybe their cost of funding and their acquisition cost are structurally too high now.

I'm not suggesting they change the APR (APR includes origination fees into account). What I'm saying is to charge borrowers a higher interest rate but keep the APR intact. Then instead of deducting origination fees from the borrower, do that on the investor side. The higher interest rate would offset the extra investor fee so it wouldn't make a difference for the investors. On the borrower side, the APR which includes the origination fee wouldn't change.

I've been clamoring for something like this for years. The fact that the bulk of LC's revenue comes from the upfront origination fee means that there is a less of an incentive for collections and to do rigorous underwriting. If LC's fees were collected along with the servicing of the loan, then LC and investor interests are better aligned. In theory this should lead to better returns.

Investors - LC / Re: LC What's working these days?
« on: August 08, 2018, 10:41:44 AM »
Most of my cash run-off is going to United States Senate Federal Credit Union. They have a 5-year share certificate (CD) yielding 3.53%. Risk free at that rate seems good as a lot of other assets seem overvalued right now to me.

I'd like to point out to anybody else reading this, that by sharing information like this Fred93 may effectively be reducing his own future returns, since the more people that know about the value of this data the more people will exploit it, and the more competition there will be for the best loans. Fred93, I salute you for your selfless sharing of your knowledge!

Well, that is one way of looking at it. I tend to look at the platform as a whole. The reality is if the median investor isn't doing well, the marketplace lending space will suffer. If the only winners are those who are doing advanced data analytics and "cherry picking" the best loans, and the rest are getting creamed, eventually that will lead to capital outflow. In the long run, the returns have to be attractive for the broad majority of investors, not just those with the special sauce. If they are not, this niche asset class will cease to be viable.

Investors - LC / Re: LC What's working these days?
« on: July 21, 2018, 12:14:10 PM »
Ryan, you've articulated much of my own sentiments. I never invested in the secondary market because I always dreaded what the tax implications was since my own personal tax situation has been relatively simple and I didn't want to add complexity with having to account for cost basis on hundreds of notes. At one point my investment in LC was over 100k and I'm now down to about $30k including all accounts. My main gripe has been that the interest rates are not high enough to offset the tax implications and the increased default risk that we've seen over the past few years. As I've drawn down my account, almost all of my funds have been going to 3.3% FDIC insured CDs.

Investors - LC / Re: Higher Interest Rates
« on: July 03, 2018, 01:06:28 AM »
I agree with Fred's insights here 100%. Several banks and credit unions in my area are offering 3.25% CDs/share certificates. Lending Club's interest rate hike is better than a sharp stick in the eye, but it is not enough for me to jump back in. I think I would need a bit higher rate to compensate for the perceived risk I feel at this point in the business cycle and the taxable disadvantage of note charge-offs.

I just wanted to give everyone an update on my winding down of my Prosper and Lending Club IRA accounts. I decided that I didn't want to sell my notes on Folio, mainly because I felt like I would be better off letting them run out to maturity rather than progressively lowering the discount on each note in order to sell them. I've spent the last 3 weeks interacting with customer service from Strata and Equity (both custodians of my IRAs and Lending Club and Prosper, respectively). With some work, I finally got about $10k transferred into a 5-year CD at a local credit union at 3.2%. Keep in mind, my LC and Prosper IRA accounts are still open, so these were basically partial IRA transfers. The credit union that I'm using has their own form and I had to follow several steps in order to 1) Get free cash transferred from LC/Prosper to IRA custodian and 2) have the requesting IRA custodian pull the funds from the current one.

It has been mildly frustrating, but doable. The fee for Strata was about $20 for this transfer. I will repeat the process once or twice more as more notes in my IRA account are paid off in full. Prosper assured me that I wouldn't be assessed a low balance fee as I continually drain my IRA because I did at one time hit the $10k benchmark for having the fee reimbursed for them. Lending Club did not offer that assurance, but they said that they were moving to a new custodian anyway and migrating their customers over, so that any fee would likely be much lower than Strata is charging now (also, the CS rep said I could call back when the fee is assessed and see if I could have it waived, which I probably will do).

I would love to be able to borrow from the Fed at 1.69% and then turn around and make loans on Lending Club...

Investors - LC / Re: Worst Month Yet
« on: April 08, 2018, 08:00:19 PM »
Think there are a lot of "wind downers" out there.

For some reason when I read your post I couldn't help but think of "downwinders." I hope our fate hasn't been as bad as those guys! The party was good for a while!

Thanks Fred, Rob, and Dr. Everett for your insight. I think the LC appointed custodian for my LC IRA is Millennium Trust. I recall talking with a customer service rep from Lending Club a few weeks ago and they said they were in the process of migrating all Millennial Trust IRA customers over to Strata at some point. I think the rep mentioned that I might be able to request to have my custodian changed sooner, though I might just be making that up; I'll have to call back to confirm. If I find anything out, I'll be sure to post to this thread.

Based on the insight that I have received thus far, it seems like the best thing for me to do will be to just move the idle cash over at periodic intervals into my new IRA set up at a credit union. That seems to make the most sense since it appears that their transfer fees are quite a bit less. I don't think I'll mess with liquidating with Folio because I'm sure that any buyer on the other end of the transaction is going to have a lot more experience than I will be as a seller and will, as a result, likely get a better deal in the transaction. Unlike others, I'm ultra conservative at this point so I'm find just going for something that is a guaranteed 3.2% and risk-free to move my savings to at this point in the economic cycle.

This is a general question for those of you who are selling IRA accounts to liquidate. Were you trying to clear out your entire IRA so you could do a one lump sum transfer of all idle cash from the IRA custodian (Millennial Trust) to another institution?

I looked at the fee schedule and, as best I can tell, it is a $150 fee to transfer out assets to a new custodian. I have a local credit union IRA in 5-year term deposits at 3.2% that I want to move my money too. The problem is that I have about $7k in idle cash in one of my Lending Club IRA accounts and I have about 400 other notes (approximately $4k) with some time to go before the notes will mature.

The dilemma I face is that I think I've already bitten the bullet for the worst of any defaults. So if I want to sell notes to get a clean IRA exit in one fell swoop, I'll probably have to discount those notes on Folio, some heavily. But I am reluctant to do this though because my reasoning is that I think what remains is has made it this far and the yields are pretty good (survivorship bias- most of the bad stuff is already charged off). However, if I keep pulling out money every so often out of the IRA, then I'll get nickel and dimmed by the IRA custodian for each asset transfer as far as I understand. So essentially I'm trying to figure out which will be less painful:

1) Do nothing: let idle cash sit in my LC account earning no interest while I'm waiting for the portfolio to wind down
2) Transfer out IRA money periodically without selling notes on Folio and get hit with IRA transfer fees each time
3) Take the losses that will occur by liquidating notes on Folio and get out in a one-and-done fashion

Any insight as to what you did and why would be appreciated.

Investors - LC / Re: Worst Month Yet
« on: April 07, 2018, 11:02:21 PM »
As always Rob, thanks for sharing. Our experiences and portfolio sizes are roughly similar. You are about $10k ahead of me in your portfolio wind-down.

Investors - LC / Re: Loan Availability by Initial Listing Status, 17Q3
« on: February 11, 2018, 08:07:17 PM »
Very interesting Rob, thanks for sharing. I wasn't aware that retail investors get sloppy seconds (e.g. whole loans that institutions don't want). Talk about adverse selection. Thanks for enlightening me.

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