Author Topic: How much discount is typical  (Read 11660 times)

gamassey

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How much discount is typical
« on: September 26, 2013, 12:07:13 PM »
I finally have a note that is 30 days late and I am thinking about selling it on Folio.  It is a 36 month $25 B4 note with a 12.25% rate.  No payments have been made, and it has been referred to a collection service.  Does anyone have some general guidelines on how to price it?

https://www.lendingclub.com/account/loanDetail.action?loan_id=6177400

Thanks,

Allen

lender_john

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Re: How much discount is typical
« Reply #1 on: September 26, 2013, 12:43:14 PM »

Personally I wouldn't buy a note that has never made a payment.

That said, you might be able to sell it for 5-10, but I doubt you could get away with 15 or more unless the buyer completely ignores the fact that there were 0 payments.
Just my thoughts..

gamassey

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Re: How much discount is typical
« Reply #2 on: September 26, 2013, 02:13:52 PM »

Personally I wouldn't buy a note that has never made a payment.

That said, you might be able to sell it for 5-10, but I doubt you could get away with 15 or more unless the buyer completely ignores the fact that there were 0 payments.
Just my thoughts..

I think you are correct, I have tried to sell it for $19 with no luck.

core

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Re: How much discount is typical
« Reply #3 on: September 26, 2013, 02:51:15 PM »
I don't usually get many of these so I can't offer any advice about pricing it.  Except to say it's going to go for very cheap.  Notes with 0 payments are not ones that you want to be stuck with once they get to this point.  0-payment notes are treated differently by LC's software and it always hurts the seller.  At 30 days, it's almost too late to get out for anything but a horrible price.  You definitely want to sell it before it changes to 31+ day late status.  I would be surprised if you got even $10 for it but like I said I don't usually trade these so I could be way off.  New Jersey Guy may take it off your hands. :)

Bilgefisher

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Re: How much discount is typical
« Reply #4 on: September 26, 2013, 03:12:00 PM »
Interest radar has an interesting feature that shows notes sold on folio the previous day.  He has it broken down by grade and status.  I'm amazed, but see 30-120 day late notes sell at a premium as well as a discount.

Randawl

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Re: How much discount is typical
« Reply #5 on: September 26, 2013, 03:16:49 PM »
I finally have a note that is 30 days late and I am thinking about selling it on Folio.  It is a 36 month $25 B4 note with a 12.25% rate.  No payments have been made, and it has been referred to a collection service.  Does anyone have some general guidelines on how to price it?

https://www.lendingclub.com/account/loanDetail.action?loan_id=6177400

Thanks,

Allen

According to the most recent 10-Q and assuming eventual charge-off, statistically speaking that note has a value of about $.76, but you can sell it for more before it gets to that point.

Interest radar has an interesting feature that shows notes sold on folio the previous day.  He has it broken down by grade and status.  I'm amazed, but see 30-120 day late notes sell at a premium as well as a discount.

Do not be mislead by those statistics.  They are horribly inaccurate as they include all notes that are removed from the platform even if they did not sell.  I can list a 30-120 day note at a 66% premium, take it down the next day, and it would be included in those averages.

yojoakak

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Re: How much discount is typical
« Reply #6 on: September 26, 2013, 03:36:34 PM »

https://www.lendingclub.com/account/loanDetail.action?loan_id=6177400


The loan performance page would be more useful.

Lower your price by 10% every few hours and report back when it finally sells.

SBryantMS

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Re: How much discount is typical
« Reply #7 on: September 26, 2013, 03:47:54 PM »
The fact that "...it has been referred to a collection service..." indicates to me that the loan has little value.  LC has information from or about the borrower that indicates their internal collection efforts will not be successful.  LC has dumped the loan on the external collection service.

I would not buy the loan at any price.  I have junk loans that have made 2 or 3 payments and then suddenly stopped paying.  LC almost immediately dumped them to the external collection service.  I have priced these at $3 and after 30 days they are still waiting on a folio buyer.

Hope you have better luck.   


New Jersey Guy

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Re: How much discount is typical
« Reply #8 on: September 26, 2013, 04:10:49 PM »
"New Jersey Guy may take it off your hands"

Nope, not me.  I always avoid notes with no payments regardless the price.  I've seen a rash of these notes lately.  Some even have the 'ol "Borrower promises to pay" log note, and I still won't buy them.

  I always fear that "None-and-Out" scenerio.  When somebody can't even make their first payment or two?  That's scarey.

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Rob L

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Re: How much discount is typical
« Reply #9 on: September 26, 2013, 07:42:31 PM »
Do not be mislead by those statistics.  They are horribly inaccurate as they include all notes that are removed from the platform even if they did not sell.  I can list a 30-120 day note at a 66% premium, take it down the next day, and it would be included in those averages.
Thanks for the info. Folio remains a complete mystery to me. I have had  a very hard time reconciling what I see on Folio with anything close to sanity. Lots of posts saying many people just have no clue, and I'm sure some of that is true, but if "statistics" like this are the norm then I understand why I can't make any sense of them.

Fred

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Re: How much discount is typical
« Reply #10 on: September 27, 2013, 03:06:50 AM »
I use this LC recovery rates as a guide (from https://www.lendingclub.com/info/statistics-performance.action):



As the footnote on the page says,  23% of outstanding principal in "Grace Period" status had been charged off when observed nine months later.

Therefore, basically I discount "Grace Period" notes by 23%, "Late16-30" by 49%, etc.  You might want to adjust for notes which have no payments yet.

core

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Re: How much discount is typical
« Reply #11 on: September 27, 2013, 03:18:41 AM »
^^ The LC recovery rates as published, even if gospel truth, should have little bearing on pricing for reasons other people have already mentioned in other threads.  In particular, this just means whether some cash will be extracted after the event, not that it will be brought current ever, and not that it ever gets paid off.

Fred

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Re: How much discount is typical
« Reply #12 on: September 27, 2013, 11:05:24 AM »
^^ The LC recovery rates as published, even if gospel truth, should have little bearing on pricing for reasons other people have already mentioned in other threads.  In particular, this just means whether some cash will be extracted after the event, not that it will be brought current ever, and not that it ever gets paid off.

Ha, ha, ha .... 

Yes, the recovery rates are hard to understand, and contains many caveats.  Just like VaR (Value at Risk), it contains the 3 factors of time, money, and probability.

However, having been in the capital market for a while, I'd take the LC recovery rates any time rather than the volatility of FOLIOfn prices.  I don't usually buy notes on FOLIOfn, but when I do I won't buy Late16_30 notes for more than 50% outstanding principal.

« Last Edit: September 27, 2013, 05:41:01 PM by Fred »

Joleran

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Re: How much discount is typical
« Reply #13 on: September 27, 2013, 11:18:24 AM »
Therefore, basically I discount "Grace Period" notes by 23%, "Late16-30" by 49%, etc.  You might want to adjust for notes which have no payments yet.

Your grace period notes seem way over-discounted, I'd imagine those fly off the shelves?

Fred

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Re: How much discount is typical
« Reply #14 on: September 27, 2013, 05:38:26 PM »
Therefore, basically I discount "Grace Period" notes by 23%, "Late16-30" by 49%, etc.  You might want to adjust for notes which have no payments yet.

Your grace period notes seem way over-discounted, I'd imagine those fly off the shelves?

Conversely, if I were to buy a Grace Period note, I wouldn't buy it if the discount was less than 23%.