### Author Topic: When 59% is >70%  (Read 12145 times)

#### Randawl

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##### When 59% is >70%
« on: January 15, 2014, 09:59:47 AM »
Supposedly the rules are that you can not list a note with a negative YTM nor any note with a positive YTM but >70% markup - it must be 70% or less mark up and generate a positive YTM.  However, it has long been that even when the YTM is positive, Folio will randomly tell me that a note I have at 69% or 68% "...can only be listed for sale with up to a 70% premium..."  Occasionally it would tell me that a note at 67% is still >70% and I have just dealt with it and lowered the price.  But in the last few weeks it has gotten worse and even notes at 59% premium (with a positive YTM) I get told that it's >70% and I need to reduce it!  I had to list it at 58.72% - it wouldn't even accept 58.81%.  This is occurring randomly as other notes list without issue at ~69%.  More fuzzy math. . .

#### core

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##### Re: When 59% is >70%
« Reply #1 on: January 15, 2014, 10:08:28 AM »
In this case it's not Lending Club's infamous fuzzy math, but rather a mistake in the displayed message.  The 70% limit is calculated based on outstanding principal only.  If you have a note  with \$10.00 remaining principal and \$1 accrued interest then the max you could sell it for would be \$17.00 and the markup would be 54%.  It has always been this way.  At least it has since I've been involved with LC.

#### Randawl

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##### Re: When 59% is >70%
« Reply #2 on: January 15, 2014, 10:21:24 AM »
Good thought.  I already listed that batch, but those numbers were excluding accrued interest.  That's why I think it's strange.  I'll post the next one with its numbers and we'll see if I'm crazy, haha.

#### core

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##### Re: When 59% is >70%
« Reply #3 on: January 15, 2014, 10:33:20 AM »
Good thought.  I already listed that batch, but those numbers were excluding accrued interest.

I see.  I had just assumed that's what it was when I saw:
I had to list it at 58.72% - it wouldn't even accept 58.81%.

LC does not display such numbers anywhere, so you're saying you sat there with a calculator and figured out those numbers out to 2 decimal places just for the purpose of this post.  *nod*

The only other thing I can think of is these were notes where a payment had just been made and the numbers were out of sync (like they always are).  You were being shown the old outstanding principal and punched that into your calculator but LC's 70% nanny was using the newer lower figure.

#### Bohb Daishi

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##### Re: When 59% is >70%
« Reply #4 on: January 15, 2014, 11:07:30 AM »
In this case it's not Lending Club's infamous fuzzy math, but rather a mistake in the displayed message.  The 70% limit is calculated based on outstanding principal only.  If you have a note  with \$10.00 remaining principal and \$1 accrued interest then the max you could sell it for would be \$17.00 and the markup would be 54%.  It has always been this way.  At least it has since I've been involved with LC.

Huh. I always thought it was based on the principal + accrued. Then again, I have only recently started marking up my investment notes to 0% YTM...
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#### Randawl

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##### Re: When 59% is >70%
« Reply #5 on: January 15, 2014, 12:10:25 PM »
Core is right on this one, the 70% LC nanny applies to principal only.  Any accrued interest can not be marked-up or even included in the asking price (as it applies to the 70%).  That's what I get for doing math post-call.

#### yojoakak

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##### Re: When 59% is >70%
« Reply #6 on: January 15, 2014, 12:43:35 PM »
I had to list it at 58.72% - it wouldn't even accept 58.81%.

LC does not display such numbers anywhere, so you're saying you sat there with a calculator and figured out those numbers out to 2 decimal places just for the purpose of this post.  *nod*

It's 2 decimal places on the Sell Page, isn't it? But that's a lot of trial an error. I hope he's using a script.

Given LendingClub's "funny math" I would be pleasantly surprised if anyone could actually reproduce these numbers using a calculator. ;-)
« Last Edit: January 15, 2014, 12:47:29 PM by yojoakak »

#### core

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##### Re: When 59% is >70%
« Reply #7 on: January 15, 2014, 01:12:27 PM »
It's 2 decimal places on the Sell Page, isn't it?

Yes it is, but the displayed markup on the sell page is based on the included accrued interest.  Which you can't use for the 70% limit.  That's what made me think Randawl wasn't running the calcs correctly.  You cannot use the sell page numbers to find the limit, it must be calculated externally.

One thing that comes up is.. the javascript uses a slightly different calculation than the server side stuff does.  So via trial and error you may get past the javascript warning but the server will still tell you it's too high.  It's never more than a penny difference.  I'm guessing rounding issues.

Given LendingClub's "funny math" I would be pleasantly surprised if anyone could actually reproduce these numbers using a calculator. ;-)

You just have to buy the right calculator.  This one on Amazon might be an inexpensive solution.  Otherwise if you have an old Intel P5 Pentium machine with a flawed FPU lying around you might have some luck with that.

#### Randawl

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##### Re: When 59% is >70%
« Reply #8 on: January 15, 2014, 02:26:30 PM »
I had to list it at 58.72% - it wouldn't even accept 58.81%.

LC does not display such numbers anywhere, so you're saying you sat there with a calculator and figured out those numbers out to 2 decimal places just for the purpose of this post.  *nod*

It's 2 decimal places on the Sell Page, isn't it? But that's a lot of trial an error. I hope he's using a script.

Yes, indeed.  Today I was using the one you made, in fact!

LC does not display such numbers anywhere, so you're saying you sat there with a calculator and figured out those numbers out to 2 decimal places just for the purpose of this post.  *nod*

Yes it is, but the displayed markup on the sell page is based on the included accrued interest.  Which you can't use for the 70% limit.  That's what made me think Randawl wasn't running the calcs correctly.  You cannot use the sell page numbers to find the limit, it must be calculated externally.

It is displayed out to two decimal places on the sell page with a script.

Edit:  It's not that hard to find the sub 70% principal number by decreasing the price in small increments until it's satisfactory.  It's usually not far off the ~0.01% YTM in those cases.
« Last Edit: January 15, 2014, 02:29:15 PM by Randawl »

#### neals384

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• Posts: 107
##### Re: When 59% is >70%
« Reply #9 on: January 15, 2014, 10:13:04 PM »
Do you get a lot of buyers for the 50%+ markup?

#### Bohb Daishi

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##### Re: When 59% is >70%
« Reply #10 on: January 16, 2014, 02:46:01 AM »
Do you get a lot of buyers for the 50%+ markup?

I've been dangling the carrot for about a month now but I haven't had any bites yet. Core claims that it happens (or used to happen) "frequently", but I'm sure the new filters and nanny policies put an end to it for the most part.

Has anyone actually tried purchasing a note at that high of markup just to see if there are any alerts or popups?
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#### core

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##### Re: When 59% is >70%
« Reply #11 on: January 16, 2014, 01:06:15 PM »
I've been dangling the carrot for about a month now but I haven't had any bites yet. Core claims that it happens (or used to happen) "frequently", but I'm sure the new filters and nanny policies put an end to it for the most part.

Correct, it used to happen frequently enough to make it worth the trouble.  Lending Club's nanny policies haven't put an end to anything, they just forced a slight change in that strategy.  Visibility is quite important when it comes to overpriced notes.

Has anyone actually tried purchasing a note at that high of markup just to see if there are any alerts or popups?

Nope, I haven't.  Please let us know how it goes.

Somewhat related to that:  I heard that many many months ago they added a warning when selling notes for too cheap.  I've never seen it myself.  Does anyone know under what conditions it appears?  Is it a fixed discount threshold for all notes or is it based on the note's current status?

#### Lovinglifestyle

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##### Re: When 59% is >70%
« Reply #12 on: January 16, 2014, 07:53:07 PM »
I get the warning box a lot.  It says I am about to list a note at a discount of 20% or more.  Not sure how consistent the warning is--seems to be capricious at the lower end, not showing up around 25-35%, but I could be wrong.  Anyway, for sure it was just there on an 80% off note.  (I have four 16-30 day lates in collections).

#### Fred

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##### Re: When 59% is >70%
« Reply #13 on: January 17, 2014, 02:42:38 AM »
I saw many notes for sale on FOLIOfn with markup around 67% - 68% today:.

Also, if you hover on the question mark above the Markup/Discount header, it does mention "sum of Outstanding Principal and  Accrued Interest."

#### Bohb Daishi

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##### Re: When 59% is >70%
« Reply #14 on: January 17, 2014, 03:00:41 AM »
Somewhat related to that:  I heard that many many months ago they added a warning when selling notes for too cheap.  I've never seen it myself.  Does anyone know under what conditions it appears?  Is it a fixed discount threshold for all notes or is it based on the note's current status?

Here's the message that pops up: "You are about to list one or more of your Notes at a discount of 20% or more. Listing a Note at a discount means you are offering it to other investors at a price that is below the current face value of the Note. If you list the Note at this price and an investor buys the Note, you will not be able to reverse the sale on the grounds that you made a mistake."

Not sure how consistent the warning is--seems to be capricious at the lower end, not showing up around 25-35%, but I could be wrong.  Anyway, for sure it was just there on an 80% off note.  (I have four 16-30 day lates in collections).

The warning appears to trigger only when you sell a note for an 80% discount or cheaper.
There are three ways to make a living in this business: be first, be smarter, or cheat.