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81
Foliofn - LC / NOTE_NOT_AVAILABLE
« Last post by Filmore on January 19, 2020, 11:17:25 AM »
I made a buying robot that evaluates secondary market offers that has been running for over a year now. These days it is evaluating over 150k opportunities for buys each day. The chief problem is that of those 150k, only about 0.1% pass my criteria gauntlet and OF THOSE less than a dozen yield a SUCCESS_PENDING_SETTLEMENT. And OF THOSE only like 30% pass the "Cancelled, Payment Processing" check (I didn't put in a filter for payment date yet). That means of 150k evaluations in a day, 1 or 2 a day land as a success.

Most of these I can't control. I can't make people desire lower returns on their secondary market sells. I can't fix the payment processing checks on the LC backend. But I CAN control the gait of "list, evaluate, buy". The only signal that can be garnered here, though, is the ratio of SUCCESS_PENDING_SETTLEMENT to NOTE_NOT_AVAILABLE. This yields a huge blind spot into the real meaning of NOTE_NOT_AVAILABLE.

A naive interpretation would simply be "your buy was too slow." As a simple example, a List request takes a fraction of a second, and a buy request takes one or more seconds on a regular basis. This means that while a buy request is being processed by the LC backend, there are MULTIPLE other rounds of "lists" that other market buyers have gone through. Likewise, when I see the List come up, there may be multiple other people who have noticed the opportunity and are in the process of a buy request.

But I'm not fully convinced that is what is happening. The other explanation for what is happening is that I make a buy request, but the system that handles the buy requests simply hasn't received the information that the note has been put up for sale (aka, the buy is TOO fast).

I would HOPE that the note no longer being available would yield the "NOTE_DATA_STALE" state, but have no evidence on why that one shows up. Does anyone have some more insight into what the NOTE_NOT_AVAILABLE status means, or if there's a better way to distinguish between "buying too fast" and "buying too slow"?
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Investors - LC / Re: Investing with MyConstant
« Last post by jong21 on January 18, 2020, 07:13:34 PM »
Quote
You could be right. Thats only from my personal experience.
Also from what I understand, each loan is backed by collateral, so if the borrower defaults, the loan amount is paid back from the collateral acquired. I must mention that I do not have the technical details of ac market or work for myconstant. They do have a Facebook profile so that maybe a good place to ask questions too.
The only reason why I did this post if I found vast differences between LC and MyConstant and I though people would benefit from what I already encountered.

It is an interesting concept. Maybe you could drop us a note monthly or so let us know how your experience is going.
Indeed an interesting concept
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Thank you very much for the solution. It really helps.
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Thanks, Fred93. I had suspected that borrowers with such a discrepancy might be less trustworthy than others; it's interesting to know that stats back that up.
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How do you determine feature importance Fred?
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Pardon me if this has been asked before, but I could not find any mention.

I'm looking at a borrower with a Revolving Credit Balance of about $8K. They request a loan of $15K for Credit Card Payoff.
How does this make sense? It would seem they are obviously requesting a loan for $7K worth of something else. Or am I misunderstanding what these terms mean?

You understand, and you've hit on a valuable concept, tho things are not always cut & dried, ie these aren't precise concepts.

LC pulls credit info from one credit reporting agency.  Every credit card company does not report to every credit reporting agency.  Therefore you can never be sure that the info from the credit reporting agency includes every card.  Etc.

Also, when someone clicks the "credit card payoff" box, they may not be interpreting that to mean "credit card payoff and NOTHING ELSE".  Maybe he's also thinkin' about the $5k he owes his bookie.  In other words, these concepts are a bit fuzzy, so a bit of mismatch doesn't mean the guy is being intentionally dishonest.  Maybe it's an indication of sloppy thinking, or just imprecise planning.

However, many lenders use the comparison that you are making, and it has been shown to have value. 

If you work with the historical data, you can see that folks who borrow an amount close to their revolving balance have a lower default rate than folks where those numbers mismatch.  You can download the data yourself and write software to examine statistics such as this, or you can use www.nsrplatform.com to do the work.  It takes a bit of work to make nsrplatform do this test, as you have to define a "formula".  I defined a formula which was balance divided by loan amount.  After you do that you can plot variables such as return or default rate vs this ratio.

In the end, if it has value in a statistical sense, then it is something reasonable for lenders to use, even if the concepts are fuzzy.

Even tho I've studied this criteria, and know it has value, I don't use it.  My problem is that my other criteria are such that I have trouble finding enough loans, so adding this criteria would restrict my selection too much.
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Pardon me if this has been asked before, but I could not find any mention.

I'm looking at a borrower with a Revolving Credit Balance of about $8K. They request a loan of $15K for Credit Card Payoff.
How does this make sense? It would seem they are obviously requesting a loan for $7K worth of something else. Or am I misunderstanding what these terms mean?
Thanks
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Investors - LC / Re: What Returns Do You Expect Going Forward?
« Last post by rawraw on January 15, 2020, 07:33:42 PM »
You are now a bank expert :)

Now a bank does have overhead associated with those deposits (branches, servers, websites, etc), but you get the idea.  And Lending Club allows geographic diversification and consumer lending, which tends to be hard for small banks to do at scale.  Most banks do mostly commercial
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General P2P Lending Discussion / Re: What tool do you use to track returns?
« Last post by Fred93 on January 15, 2020, 03:22:18 PM »
Suggestion: Don't try to track loan by loan.  Just track your account balance.  Of course you'll have to track when you make deposits.
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Investors - LC / Re: What Returns Do You Expect Going Forward?
« Last post by Rob L on January 15, 2020, 11:03:02 AM »
That's right. Once you understand this, you'll see why banks are so conservative. Small swings in assets can completely wipe out their equity

Going back to why LC loans are attractive to banks. Very simplified example with crude approximations. If I invest my money, say $40M, in LC loans at 4% APR my return on that investment is 4% (I have no leverage). If a bank's equity is $40M but its assets are $133M that cost the bank 1% APR, and the bank invests 90% of those assets ($100M) in LC loans at 4% APR then the bank's return on its $133M assets is 2.7% APR (NIM) but its return on $40M equity is more like 8.1% APR (Leverage is 3X). Banks can play very conservatively and still do quite well. Thus the preference for A Grade loans and an explanation of why banks find them attractive and individuals not so much.
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