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21
Off Topic / Re: To What Lengths Do Some Folks Go In Planning Their Income Taxes
« Last post by Rob L on January 12, 2020, 12:36:18 PM »
I went through my last paystub and built a simulated W-2 so I know where my taxes stand. Historically my employer has not sent out the W-2 forms until the last possible moment.

Yeah; don't they all!  :-\
22
Investors - LC / Re: What Returns Do You Expect Going Forward?
« Last post by Rob L on January 12, 2020, 12:16:04 PM »
Since LC still receives the retail based funding they need even though returns continue to diminish, there is little incentive for them to implement change to benefit the investor.

They receive most of their cash from institutional investors, and most of that from banks.  Why banks are satisfied with such low yields is beyond me, probably because I'm not a bank.   ... but we have to consider that these days we're competing with banks.
Because banks have enormous leverage that amplifies returns.

A bank often just wants a 1 percent return on assets. Then the 80 percent leverage produces a good ROE. Most Lending Club people are fully funded by equity.

Let me describe my very simplified understanding how this bank leverage thing works and you (and others) correct my errors.

First banks acquire deposits from customers, say savings accounts, and pay their customers interest (say it's an online bank like Ally that pays a high interest rate of 1.6%, the national average savings account now pays 0.09%). Through the magic of fractional banking the bank may lend up to 10 times the amount of deposits it holds. So the leverage is 10:1. The bank's cost of the money it's loaning is 1/10 * 1.6% = 0.16%.

Now LC comes along and offers consumer unsecured whole loans to the bank that they can analyze and perform due diligence on prior to acquiring them. If the bank is very conservative and only acquires loans from super prime borrowers their median ROI from the OP table is 4.3% - 0.16% = 4.14%. I have some direct experience from a few years ago and banks at that time only bought super prime A Grade loans. Pretty sweet deal for hardly having to lift a finger. The bank's cost of acquisition of the loans from LC is trivial and LC services the loans for them for a fee (already included in that median 4.3% ROI from before).

The bank has a very low start up cost, has almost no investment in personnel, plant and overhead, can control the amount it loans out on a daily basis and can walk away from lending in the future at no cost anytime it chooses to do so. Basically the bank has simply outsourced almost the whole process making it extremely flexible. Additionally the bank benefits from whatever asset diversification these type loans provide and the leverage is against a broadly diversified portfolio of loans within the asset class (Big Short not withstanding, lol). If you are a bank what's not to like for a portion of your loan portfolio.

If individuals could borrow at 0.16% it would be a pretty sweet deal for us as well.  :)

It's worth mentioning that Goldman Sachs decided on a different business model for Marcus. I guess they thought the middlemen (LC and Prosper) cost more than they were worth and decided to take the whole process in-house. The jury is out on both models I suppose.
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Investors - LC / Re: What Returns Do You Expect Going Forward?
« Last post by rawraw on January 12, 2020, 09:50:40 AM »
Since LC still receives the retail based funding they need even though returns continue to diminish, there is little incentive for them to implement change to benefit the investor.

They receive most of their cash from institutional investors, and most of that from banks.  Why banks are satisfied with such low yields is beyond me, probably because I'm not a bank.   ... but we have to consider that these days we're competing with banks.
Because banks have enormous leverage that amplifies returns.

A bank often just wants a 1 percent return on assets. Then the 80 percent leverage produces a good ROE. Most Lending Club people are fully funded by equity.
24
Investors - LC / Re: What Returns Do You Expect Going Forward?
« Last post by macroman7799 on January 12, 2020, 02:32:04 AM »
I think to a substantial degree banks are getting preferred choice of loans and would not be willing to take many of the loans going through the retail platform, at least not on the terms that they are being offered.

Do you have any evidence?

LC has many times said it doesn't happen.

You're not the first to suggest this, but none of the other folks had any evidence.  Just sour grapes, conspiracy theory, etc.

Evidence, no. It is my opinion. That's why I qualify my statement with "I think".

Really I don't expect to purchase fractional shares of loans at $25 each exactly on level terms with larger players that have a bigger share of the action. I also know that as an individual I am avoiding a lot of expenses that the larger players have and can't avoid.

If I want to participate in the bank's end of P2P I'll buy banking stocks.
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Foliofn - LC / Re: Stale Credit Scores.
« Last post by jrl on January 11, 2020, 08:10:59 PM »
I am sure other people have brought this up, because I've seen this issue discussed on this forum many times over the past few years.

Ok, I went and did a search, but could only find this discussion: Odd FICO trend. https://forum.lendacademy.com/index.php/topic,4250.0.html

Yea, I also did a search and can't find the discussions I remember.  My memory is that there was one guy who would look every month on the day he expected the FICO scores to update and call LC when they didn't.  My impression from that discussion was that the process to put the update scores into the database probably contained a manual step, so someone had to get around to it, which made the update variable by many days.

I called again yesterday, they still "never heard of something like this happening." The guy (Chris?) seemed more interested, after I showed him the exact issue. No update yet. I'll wait until the 15th before calling again. They seem adamant that it's automatic though, but could just be guessing. Though it would make sense with the amount of Loans/Notes they have.

I tried to go through the loanstats file, but the last_pull_d on those are all the first of the month. (The month it was pulled or the one after?) So that's kinda useless. Out of my non-charged-off/non-fully-paid notes, 7.3% have a last_pull_d of less than 30 days; 85.7% are 11/14/19; 1.37% (24) are prior to 11/14/19 with 7 notes from 2018, and 1 from 2017. All the ones prior to 11/14 on my account are current. Out of my 1748 Current/IGP/Late/Default notes, I have at least one and up to ten notes with a last_pull_d for every day since 11/14, except Dec. 1, including weekends, up to yesterday. All of the notes on this account are from the primary platform, but it's a similar situation on my smaller IRA now-folio account.
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Investors - LC / Re: What Returns Do You Expect Going Forward?
« Last post by jrl on January 11, 2020, 06:39:41 PM »
I think to a substantial degree banks are getting preferred choice of loans and would not be willing to take many of the loans going through the retail platform, at least not on the terms that they are being offered.

Do you have any evidence?

LC has many times said it doesn't happen.

You're not the first to suggest this, but none of the other folks had any evidence.  Just sour grapes, conspiracy theory, etc.

There's a very subtle difference when looking at the difference between fractional and whole loans, especially in the riskier grades. It seems like Fractional investors have been getting better A loans, while Whole investors got better C/D/E loans. What percentage of whole loans go to banks, I can't remember. How much of this can be explained by variance, I don't know either.

Data from NSR, 2015-2017 vintage loans: https://i.imgur.com/XFxZxpy.png

Also, seperated by credit score (Prime/Superprime): https://i.imgur.com/EXRmYEY.png

Both have all loans equalized at $1000. I use 2015-2017 because that's when loan quality/returns degraded, and 2018 vintage is too recent and would skew the numbers UP.

If there exists any bias toward whole loans, it's very small.
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Foliofn - LC / Re: Stale Credit Scores.
« Last post by Fred93 on January 11, 2020, 05:31:27 PM »
I am sure other people have brought this up, because I've seen this issue discussed on this forum many times over the past few years.

Ok, I went and did a search, but could only find this discussion: Odd FICO trend. https://forum.lendacademy.com/index.php/topic,4250.0.html

Yea, I also did a search and can't find the discussions I remember.  My memory is that there was one guy who would look every month on the day he expected the FICO scores to update and call LC when they didn't.  My impression from that discussion was that the process to put the update scores into the database probably contained a manual step, so someone had to get around to it, which made the update variable by many days.
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Investors - LC / Re: What Returns Do You Expect Going Forward?
« Last post by Fred93 on January 11, 2020, 05:18:48 PM »
I think to a substantial degree banks are getting preferred choice of loans and would not be willing to take many of the loans going through the retail platform, at least not on the terms that they are being offered.

Do you have any evidence?

LC has many times said it doesn't happen.

You're not the first to suggest this, but none of the other folks had any evidence.  Just sour grapes, conspiracy theory, etc.
29
Off Topic / Re: To What Lengths Do Some Folks Go In Planning Their Income Taxes
« Last post by macroman7799 on January 11, 2020, 04:44:21 PM »
I went through my last paystub and built a simulated W-2 so I know where my taxes stand. Historically my employer has not sent out the W-2 forms until the last possible moment.
30
Foliofn - LC / Re: Stale Credit Scores.
« Last post by macroman7799 on January 11, 2020, 04:41:29 PM »
Thanks for pointing this out. I only sell marginal notes on Folio. I use the credit score as one of my criteria but had not noticed how stale that data is. Maybe more of us need to call LC so that it's more on their radar.
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