Author Topic: Fairer Solutions to Excess Investor Demand  (Read 82582 times)

rawraw

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Re: Fairer Solutions to Excess Investor Demand
« Reply #120 on: August 27, 2013, 07:19:03 AM »
Yea, you right.  Comparing secured borrowings to unsecured loans or credit card advances to LC is the way to go. . .

And have you been following the yield curve?  I'm pretty sure RLV99 has, as the yield curve has not stayed down.  There are more points on that yield curve than Federal Funds Rate.   Our investments aren't pegged to overnight risk free rates, anyway.  Check out the 10 year rate.

The rising yield curve doesn't make headlines on the mainstream media, and you would have a hard time convincing me with all this cheap credit at low fixed rates floating around.  Those are the offers sitting on my coffee table and in my e-mail.  That 6.78% + origination that LC is offering doesn't look so hot in comparison.  Consumers don't care about secured or unsecured loans (unless they intend to default).  They are just looking for the best deal much like investors look for the best returns.
What are you talking about?  Have you ever made a loan to someone?  Movements don't make headlines (i.e. 30 year mortgage?)?   It's obvious it won't be productive to continue this. . .


cfb

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Re: Fairer Solutions to Excess Investor Demand
« Reply #121 on: August 27, 2013, 12:12:26 PM »
Given the default rates, if they lowered interest rates by much to stimulate borrowing, I wouldn't invest.  There is barely enough risk adjusted return as it is.

brycemason

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Re: Fairer Solutions to Excess Investor Demand
« Reply #122 on: September 08, 2013, 08:13:55 PM »
Upon further thinking, I think LC already has the tools to alleviate this.

Dramatically lower the maximum investment for the fractional platform to $100 (something quite small that appeals to most individuals). Adjust the percentage of loans that goes to the whole loan program to equilibrate ability to invest between the two classes of investors.

Institutions buying huge 75% fractions may as well just buy whole loans.
Retail individuals almost never need large fractions.

Lovinglifestyle

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Re: Fairer Solutions to Excess Investor Demand
« Reply #123 on: September 08, 2013, 08:45:44 PM »
Upon further thinking, I think LC already has the tools to alleviate this.

Dramatically lower the maximum investment for the fractional platform to $100 (something quite small that appeals to most individuals). Adjust the percentage of loans that goes to the whole loan program to equilibrate ability to invest between the two classes of investors.

Institutions buying huge 75% fractions may as well just buy whole loans.
Retail individuals almost never need large fractions.

Love it!  Sounds perfect to me.  The sooner the better, please. 

stowers

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Fairer Solutions to Excess Investor Demand
« Reply #124 on: September 08, 2013, 10:41:09 PM »
Yes, sounds perfect.

Randawl

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Re: Fairer Solutions to Excess Investor Demand
« Reply #125 on: September 08, 2013, 11:15:56 PM »
Upon further thinking, I think LC already has the tools to alleviate this.

Dramatically lower the maximum investment for the fractional platform to $100 (something quite small that appeals to most individuals). Adjust the percentage of loans that goes to the whole loan program to equilibrate ability to invest between the two classes of investors.

Institutions buying huge 75% fractions may as well just buy whole loans.
Retail individuals almost never need large fractions.

 :P

From page 1 of this thread, post #4:

Solution: Dollar amount restriction per loan fraction (Investment limit per loan, per SSN).
Investors are limited to loan fractions of X amount of dollars, allowing for hundreds of investors to participate in a particular loan.

This would stem the tide, but only for a short period of time.  If the fraction restriction was set to $100, even on a $35,000 loan it could still be theoretically fully funded by just 350 investors.  This may seem like a good idea now, but it won't be long before thousands and tens of thousands of investors want the same note.  This is a Band-Aid solution and investors will find themselves with the same hyper-competitiveness as this asset class continues to grow.


It would be great if they did this, but it is only temporary and must include the other suggestions eventually.  Shifting more of the loans to the whole pool may make a difference, but only temporarily.  If done, I see this cycle repeating itself and "in the end" the question that begs to be asked is how much is enough?  50%, 75%, 99%?

brycemason

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Re: Fairer Solutions to Excess Investor Demand
« Reply #126 on: September 08, 2013, 11:21:47 PM »
Randawl,

I'm not sure that future growth of the retail investor base is a big concern, because as the investor base grows LC will also be growing the borrower base. They can pull other tricks to try to balance that out. The major problem is that a couple big bots are chomping up all the fractions, leaving slow humans in the dust. I think a better use of the existing whole loan program solves this issue. LC will have to prevent multiple accounts (of the same institution) from buying tons of $100 increments, though.

Bryce

rlv99

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Re: Fairer Solutions to Excess Investor Demand
« Reply #127 on: September 09, 2013, 10:39:35 AM »
I remain opposed to the Whole Loan Program while in support of the maximum investment limit of $100.

Its elimination will have a significant impact on the loan inventory for all investors and its elimination should have no impact on the institutions.  What's the difference to them having $10M invested in 100,000 loans versus that same $10M in 25,000 loans?  Just a little more time!

brycemason

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Re: Fairer Solutions to Excess Investor Demand
« Reply #128 on: September 09, 2013, 10:50:42 AM »
RLV99,

The whole loan program is entirely necessary for institutions who need to own the entire loan. When an entity buys an entire loan, LC can stamp it and actually transfer ownership to the entity. This is the ultimate in bankruptcy protection and a precursor to a lot of institutions' participation. Their participation is necessary to maintain the scale that LC needs to be profitable. So, I contend that the whole loan program is here to stay and any solutions suggested without it are dead in the water.

Even if LC scaled the whole loan percentage to something like 60%, most retail investors would be able to invest their capital at $25/loan fairly quickly, as long as they didn't miss an upload. If it keeps the huge fractions away, there will be a lot more availability of all types of loans for many more people.



Peter

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Re: Fairer Solutions to Excess Investor Demand
« Reply #129 on: September 09, 2013, 10:56:30 AM »
Guys, I am in San Francisco and meeting with Renaud Laplanche and Scott Sanborn this morning. I will put this question to them and see how they respond.
Publisher of the Lend Academy blog

See my returns here: http://www.lendacademy.com/returns

yojoakak

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Re: Fairer Solutions to Excess Investor Demand
« Reply #130 on: September 09, 2013, 11:04:08 AM »
Loans getting funded fast is good for LendingClub and good for borrowers.

Any change that slowed down the pace of new loans getting funded even for a day, maybe even for an hour, would never fly.


The only way I could see you getting them interested is if you moved your filters to LendingClub, and agreed to auto-invest in any loan that matched the filter as soon as it came out. Sort of like a mini-LC Advisors.

However, this would require LendingClub to add a new feature to their website. And I think we all know that that is never going to happen.

Lovinglifestyle

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Re: Fairer Solutions to Excess Investor Demand
« Reply #131 on: September 09, 2013, 11:40:11 AM »
Loans getting funded fast is good for LendingClub and good for borrowers.

Any change that slowed down the pace of new loans getting funded even for a day, maybe even for an hour, would never fly.


The only way I could see you getting them interested is if you moved your filters to LendingClub, and agreed to auto-invest in any loan that matched the filter as soon as it came out. Sort of like a mini-LC Advisors.

However, this would require LendingClub to add a new feature to their website. And I think we all know that that is never going to happen.

I don't understand why slowing down the funding pace would be a deal breaker considering that the review time is extensive.  Not many would notice half a day longer spent in review.  A borrower wouldn't drop out over a few hours delay, although the interest time clock on a 24 hour period could run out if the issuing time were not manipulated on the back end.  Would you mind elaborating on the harm involved?  Or explaining what I'm wrong about and why? 

brycemason

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Re: Fairer Solutions to Excess Investor Demand
« Reply #132 on: September 09, 2013, 01:07:28 PM »
Loans getting funded fast is good for LendingClub and good for borrowers.

Any change that slowed down the pace of new loans getting funded even for a day, maybe even for an hour, would never fly.

I agree. It's good that my proposed solution doesn't change the pace of funding on average. It just somewhat shifts the distribution of which get funded super fast. The money coming onto the platform doesn't change.

yojoakak

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Re: Fairer Solutions to Excess Investor Demand
« Reply #133 on: September 09, 2013, 01:33:31 PM »
I don't understand why slowing down the funding pace would be a deal breaker considering that the review time is extensive.
That's true. They could leave the loan open for investment until they complete the review then randomly select which investors would get notes. I have to admit I don't pay much attention to new issues though anymore. What's the average length of time a loan spends "Under Review" these days?
« Last Edit: September 09, 2013, 01:37:20 PM by yojoakak »

Fred

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Re: Fairer Solutions to Excess Investor Demand
« Reply #134 on: September 09, 2013, 02:18:30 PM »
This is a supply-demand issue -- not an operation issue (e.g., whole-loan vs. fractional, max note amount per note) -- and we need a supply-demand solution.  LC can tweak here and there, but if the fundamental issues are not addressed, the tweaks will only be band-aids.

One obvious solution is to lower the interest rates -- this will reduce investors demand and simultaneously increase borrowers supply.

Other options:
- reduce origination fees
- increase service fees
- more borrower advertisement