Author Topic: Returns during Covid-19 Economy  (Read 1364 times)

.Ryan.

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Returns during Covid-19 Economy
« on: April 26, 2020, 11:41:18 AM »
I have a small LC account (IRA) that is still active. I track performance closely, and was expecting a significant decrease in returns with the current state of the economy.

Surprising to see, however my returns have actually slightly increased over the last two months. From 7.4 at the beginning of the year to about 7.7 now. Knock on wood.......

Curious to hear how others returns are currently faring......

JDII

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Re: Returns during Covid-19 Economy
« Reply #1 on: April 27, 2020, 11:57:43 AM »
I am seeing the same thing. Lending Club has some plan in place for the borrowers to defer payments.  A lot of my payments are being pushed back into June and July.  I'd guess that anyone who would have been late on a payment even before this foolishness hit is taking that option.


JimGasperini

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Re: Returns during Covid-19 Economy
« Reply #2 on: April 27, 2020, 11:33:37 PM »
Looking in Holdings at my notes that Lending Club considers "Current," I see that fully one in ten shows a due date more than a month out (due dates in June and July.) Checking details, most of them show no payment made during the last couple months, payment status for those months "Deferred," and this text:

This borrower has had an unexpected life event and has entered in a hardship plan. Hardship plans can be either short-term (ranging 3 - 12 months) or long-term (permanent) with the obligation that the borrower continue to make regular monthly payments at a lower payment amount. At the end of the short-term plan a borrower will revert to paying their original payment amount.

LC does not seem to have yet factored the massive number of borrowers now on "hardship plan" into the calculation of returns it shows to investors. Until they do, am I wrong in thinking that the estimate of "returns" for accounts with many such "current" notes should be regarded as fiction?

Fred93

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Re: Returns during Covid-19 Economy
« Reply #3 on: April 28, 2020, 12:29:45 AM »
LC does not seem to have yet factored the massive number of borrowers now on "hardship plan" into the calculation of returns it shows to investors. Until they do, am I wrong in thinking that the estimate of "returns" for accounts with many such "current" notes should be regarded as fiction?

Have you actually reproduced their calculation to verify this, or is this just a supposition?

The formula they've published for their return calculation depends on actual payments, not words like "current", so I'm skeptical of your interpretation.

Fred93

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Re: Returns during Covid-19 Economy
« Reply #4 on: April 28, 2020, 12:51:37 AM »
In light of Jim's remarks about hardship plans, I looked at my portfolio.  (I downloaded the spreadsheet so I could sort by status etc and easily count)

I have 0 loans presently in hardship plans.

I have 74 loans that were at one time in a hardship plan.
Of those 74 loans their status now... 26 fully paid, 9 current, 2 grace period, 1 late, 1 default, and 35 charged off.

14846 total loans on the spreadsheet (including of course completed loans as well as live ones).  74/14846 = about 1/2 of 1% of loans.

So Jim, you have 10% of your active loans in hardship plans?  That sounds very bad. 

JimGasperini

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Re: Returns during Covid-19 Economy
« Reply #5 on: April 28, 2020, 01:58:55 PM »
To calculate Adjusted Net Annualized Return, according to the LC site, "we make a deduction for estimated future losses on loans based on status ("Note status adjustment amount"). To calculate this deduction, we apply an estimated loss rate to the outstanding principal of a Note for which the corresponding member loan is past due but not charged off.” I believe “current” is one category of “status.”

Before about two months ago, when my notes were not paid on time, their status would change from “Current” to “In Grace Period,” then “Late 16-30 Days,” etc. I would occasionally notice notes labelled “in hardship plan,” usually in some status other than “Current.” I could see a rough correlation between the Adjusted NAR and the number of non-current notes:  when many notes slipped into Grace Period and beyond, Adjusted NAR went down by as much as .5%. When those borrowers managed to catch up, the Adjusted NAR would go back up.

Now 1/10 of my notes classed as “Current” are actually behind schedule; payment for some has been “deferred” for two months. Yet my Adjust NAR continues to creep up, about .01% per day. I am indeed making a supposition.:  that notes in “hardship plan” are not included in the "deduction for estimated future losses on loans based on status.”

I would be interested in hearing any alternative suppositions, or, even better, official explanations for what appears to me to be a discrepancy.

JimGasperini

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Re: Returns during Covid-19 Economy
« Reply #6 on: April 28, 2020, 02:07:05 PM »
Fred93, where in the spreadsheet did you find your information about which notes are in "hardship plan?" When I look at an exported spreadsheet, see columns far to the right detailing information about a few notes on hardship plans years ago. I can't find anything about notes in "hardship plan" currently.

If you look at your list of "Current" notes, do you see any with a due date in June or July? If so, try looking at the details for some of them.

Fred93

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Re: Returns during Covid-19 Economy
« Reply #7 on: April 28, 2020, 03:37:40 PM »
Ok, I get it.  You're saying that the "Adjusted" return, ANAR, isn't being "adjusted" in a reasonable way for loans in hardship plans.

Re spreadsheet, I just looked at the hardship columns.  I assumed they represented correctly loans in hardship plans.

Fred93

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Re: Returns during Covid-19 Economy
« Reply #8 on: April 28, 2020, 04:37:12 PM »
If you look at your list of "Current" notes, do you see any with a due date in June or July? If so, try looking at the details for some of them.

OMG!  The hardship columns are blank, and the "next payment" is more than  1 month in the future!  I have 355 loans in that category, and THE HARDSHIP FIELDS ON THE SPREADSHEET ARE ALL BLANK.  When I look up the detail web page on these loans they say "in hardship plan.

The loans are in hardship plans BUT THE SPREADSHEET DOES NOT SHOW THIS!

In other words, the data LC is putting in the hardship fields is just plain wrong.

JimGasperini

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Re: Returns during Covid-19 Economy
« Reply #9 on: April 28, 2020, 10:15:58 PM »
Yes, that data is wrong. Also, the fact that so many "current" notes are actually not receiving timely payments explains, I believe, the surprising discrepancy .Ryan noted in the original post:

"..I was expecting a significant decrease in returns with the current state of the economy.
Surprising to see, however my returns have actually slightly increased over the last two months."

.Ryan.

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Re: Returns during Covid-19 Economy
« Reply #10 on: April 29, 2020, 12:15:17 PM »
I'm glad I started this post. The uptick seemed to defy all logic.

So I downloaded the extended notes list. To see the discrepancy in my notes, should I filter to show only "current" and then sort by 'last payment date' (column BW)? Anything longer than 30 days means something's up, right?

Thanks

JimGasperini

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Re: Returns during Covid-19 Economy
« Reply #11 on: April 29, 2020, 01:03:21 PM »
Yes, that's one way to check. You can also review them online in the Holdings/Notes section, 15 per screen. There you will be able to select a link (on "current") to see details for a particular note. On the details screen you can check to see if the note is on "hardship plan."

Edward Reid

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Re: Returns during Covid-19 Economy
« Reply #12 on: April 30, 2020, 08:27:43 AM »
I am indeed making a supposition:  that notes in “hardship plan” are not included in the "deduction for estimated future losses on loans based on status.”
Under normal conditions, this would make sense to me. AIUI, a hardship plan is normally negotiated by the borrower, indicating that said borrower is in active contact with LC. Although those people are in financial straits, they are making an effort. The ones I think most likely to default are the ones who have simply broken off contact.

But (again AIUI) LC has changed the way borrowers get into a hardship plan due to the crisis. And based on Fred's and Jim's observation about the spreadsheet data, perhaps they have a new flag that's being displayed as "hardship" but is actually a new category. And since none of us knows how this is going to turn out, it's reasonable not to adjust the calculation at this time.

Lots more suppositions of course.

Edward