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Messages - Fred

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1411
Investors - LC / Re: How much of your portfolio goes to P2P lending?
« on: March 31, 2013, 12:57:48 AM »
It surprises me how conservative many investors are on this forum (with regard to your p2p investments).

For me, this means the investors are not necessarily conservative but "balanced".  We understand the potential rewards; but are proceeding cautiously due to many reasons, including those you mentioned above.




1412

But they appear to have no shortage of investors willing to put up with its shortcomings.


I think LC should be careful not to offend too many investor here.

I heard the "barrier to entry" on setting up a new P2P platform is high, around $10M. 

However, if enough investors -- including the institutional kinds -- are upset with LC and can band together, perhaps a new P2P platform can be established by utilizing the "best of" LC and Prosper while avoiding the "worst of" them (e.g., batching of  new loans upload).


1413
Investors - LC / Re: Verified income
« on: March 31, 2013, 12:20:01 AM »
Fred, I like the way you are thinking.  I wish more people on this board thought critically.  But I think you are going down the wrong path.  The MBS mortgage didn't blow up solely because of verification of income (The Credit Card industry is still chugging along, without verifying most people's income).  The MBS market blew up because loans were being made with the source of repayment being collateral and not cash flow.  If you aren't involved in finance/banking, basically what this means is that everyone forecasted the collateral values would at least remain constant (most forecasted they'd increase forever).  They weren't worried about incomes because if the borrower didn't pay, the bank could foreclose on the asset and sell it.  Since they were increasing Y/Y, not much risk to the bank (we do have selling costs and such, but those are helped by the gain in market value).  But what happened?  The loans were made to bubble-level prices and the floor came out from under them.  Borrowers don't want the houses anymore (they are underwater and mortgages have lots of various laws (state and federal) which limits the recourse.  These precipitous drops in collateral values were accompanied with spikes in unemployment as well.  Basically, what I'm saying is income wasn't the sole purpose of the problem.  It did play a part, but there were a lot of moving parts.

Well put, rawraw.  I agree that there were a lot of moving parts.

Full disclosure: I was a "quant" in 2007-2008 working on RMBS (Residential MBS) pricing engine for a Wall Street bank.  RMBS, CDO, CDS are hot potatos now.  However, I do believe some lessons learned on credit risks are still applicable to P2P consumer loans.

There are almost 100 attributes in downloadable LC loan data, somebody can analyze which are (statistically) significant factors for default. 

I do give statistical preference in my model to loans whose "is_inc_v" is TRUE.  Note, this is just a statistical preference, not a binary yes-no decision.



 

1414
Investors - LC / Re: LC originations taking too long
« on: March 30, 2013, 11:48:52 PM »
Thanks edward.

I am also a landlord, and perform background check on new tenants.

I used a third-party provider to verify income, employment, etc., of a prospective tenant.  It cost me about $40 and took 3-5 days.

Besides, it seems that 40% of the borrowers do not go through this intensive verification.  I'd assume this means their loans are quickly originated once fully funded. 

However, I don't think this is the case for me.  I invest mostly on D-G loans, and most of them seem to take 5-7 days to originate after being 100% funded.  (Have not really done data analysis on this, but it sure feels that way.)




1415
I personally think LC should do away with uploading new loans in batches and start doing it in real-time.

I hope this is not a system-capacity issue.  As a software developer, I would think most of the processing power is spent on payments + fees calculation & allocation on the N:N borrowers-loans relationships.  I don't think it takes a lot of system capacity to put new loans to the platform in real-time.

Batches are so old-fashioned.  I am not sure what LC does prior to putting new loans on to the platform; however, can you imagine if Facebook or Twitter are putting updates in batches?


1416
Investors - LC / Re: How much of your portfolio goes to P2P lending?
« on: March 30, 2013, 10:30:18 AM »
I'm 24 years old and piling on the risk while I can. My entire investment allocation is as follows:

2% ETFs
4% Lending Club Notes
7% Cash
18% Individual Equities
34% Equity Options
35% Prosper Notes

35% Prosper and 4% LC?

I was 100% Prosper 0% LC, but now 30% Prosper 70% LC.

I find LC a much better platform risk-reward wise.

Clarification: the 30-70 was the allocation only on my P2P investment.

The P2P investment itself is about 10% of my non-property; planning to double that to 20% in a year.

I am 43 y.o.  8)

1417
Investors - LC / Re: How much of your portfolio goes to P2P lending?
« on: March 30, 2013, 10:21:12 AM »
I'm 24 years old and piling on the risk while I can. My entire investment allocation is as follows:

2% ETFs
4% Lending Club Notes
7% Cash
18% Individual Equities
34% Equity Options
35% Prosper Notes

35% Prosper and 4% LC?

I was 100% Prosper 0% LC, but now 30% Prosper 70% LC.

I find LC a much better platform risk-reward wise.

1418
Investors - LC / Re: LC originations taking too long
« on: March 30, 2013, 10:11:00 AM »
Can somebody share what exactly LC does to originate a loan?

I know the answer can be "depends on the loan", but I'd like to get a bird's eye view on the major steps and approximate time for each step.

1419
Investors - LC / Re: Lower Service Fee Rates?
« on: March 30, 2013, 09:26:42 AM »
Ah OK, thanks.

Have been following this forum a while, but somehow didn't get to that thread.

1420
Investors - LC / Re: Verified income
« on: March 30, 2013, 09:24:08 AM »
If you remember our financial crisis experience from 2007, one of the factors for the problem was that banks were lending money to borrowers without verifying their income.

Perhaps people at that time tend to lie more on their loan application  than today's borrowers.

Or, perhaps size matters: income verification does not affect small loans (< $35 K) as significantly as it does mortgages?


1421
Investors - LC / Lower Service Fee Rates?
« on: March 30, 2013, 09:08:44 AM »
Hello everyone,

I noticed from the downloaded loan data that the Service Fee Rates column has been declining since March 8?  For example, for SubGrade A5 loans, the service fee rate was 1.0 before March 8 but now around 0.69 and 0.42.

As an investor, I welcome these lower rates. 

However, I'd also like to know the rationales behind this: is this just temporary, does LC have an issue attracting new investors, etc?




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