What is the lifecycle of a "hardship" loan?

[rj2]

So what's the lifecycle of these hardship loans?

They are listed as current now, but not making payments. Presumably at some point they're supposed to start paying--can they just keep on deferring? For how long?

And once they start finally being "late", do they go through the usual lifecycle for a late loan, starting with 15-30 days, and then 120 days? Or does the lateness "backdate" to the original deferred payment once they are late?

And so how long from today, where it's marked hardship, to when LC is going to mark one of these loans as charged off?

[Fred93]

So what's the lifecycle of these hardship loans?

Good question. 

I also want to know what the chances are that such a loan will pay vs charging off.  We have no data on which to estimate.  LC says everything is fine, but it doesn't look fine to me. 

LC's various computations (ANAR for example) presume that these loans will behave just like loans that are paying, but I don't believe that. 

The delinquency spreadsheet that LC publishes shows that delinquency GOT BETTER after covid19, but this is fake news because they don't show that they are including a bunch of nonpaying loans as current in that calculation. 

They are listed as current now, but not making payments. Presumably at some point they're supposed to start paying--can they just keep on deferring? For how long?

Surely its a one-time thing,eh?  Otherwise that would be so stupid I just can't imagine.

And once they start finally being "late", do they go through the usual lifecycle for a late loan, starting with 15-30 days, and then 120 days? Or does the lateness "backdate" to the original deferred payment once they are late?

I've not seen any explanation on this.  The hardship "feature" has been around for a long time, so we could look back at some pre-covid19 hardship loans and track their lifecycle.  Unfortunately, LC makes them very difficult to find.  I have not put forth the effort.  Perhaps after they fix the spreadsheet bug it will be easier.

I suggest you pose your question to LC directly.  I believe the lifecycle of a hardship loan would be a worthy subject for a nice explanation for the FAQ at the very least.

[rawraw]

I doubt LC will give any guidance on this, since it is forward looking.

How would I approach it? Well I'd start with the base charge off rates for the loan attributes in 2008 time frame. This would give us a base rate of charge off by risk characteristics.   From there you can make judgements on whether to adjust it up or down depending on the trends in the economy.

They won't just keep deferring, that is typically a frowned upon lending practice. But there are unique rules being applied now, so it may defer longer than we expect. I'd assume LC is making this up as they go. I work for a consumer lender and we are making it up as we go as well

[LA87654]

8.3% of my investment is in Covid hardship status.  The next couple months will be interesting.

[rj2]

Today they cancelled all my posted sales of hardship loans and they cannot be relisted for sale. The little "!" appears next to the loans in folio and it says it cannot be sold because it's in hardship status.

Sooooo....

We're stuck with them.

[Fred93]

Good!  For awhile they were allowing people to buy and sell hardship loans, but they never implemented reasonable user interface or API to allow buyers to see that they were buying hardship loans.  They failed big time in their fiduciary duty to buyers!

So now that's fixed.  Good.

[kib]

I disagree.  While the hardship status should definitely have been clearly defined and marked for buyers, there's no reason I should have to hold these notes indefinitely if someone else wants to buy them.  I realize the discount would need to be significant, but I've been discounting notes to get out of LC for what seems like years, and now that dangling carrot just moved back a few more months.

[Fred93]

I think you can agree that the buyer needs  to be aware of the hardship status.  That requires software work.

[rj2]

Good!  For awhile they were allowing people to buy and sell hardship loans, but they never implemented reasonable user interface or API to allow buyers to see that they were buying hardship loans.  They failed big time in their fiduciary duty to buyers!

So now that's fixed.  Good.

Yes, I was the victim of that, bought a bunch of notes and only found out later they were "hardship", because I didn't click into each one.

I escalated it to LC support and their advice to me was to sell the notes on folio. Then the next day they blocked my ability to do that--at first silently, it's actually not been possible to sell the for awhile--they would look like they were listed, but no one could see them. Now you know for sure they aren't.

The ideal solution would be to list them for sale and have a tick box, "[] Include hardship loans", so that people could know what they are getting and pay and appropriate price.

[rj2]

A few of my loans, which haven't been paid in three months, are now in "grace period".

I guess we know the answer to the lifecycle question...

[jheizer]

Are they sell-able now?

[rj2]

I think they can only be sold once the hardship period ends. At that point he loan will either be in grace period, or current, depending on whether the scheduled payment was made.

[Rob L]

"Neverlate" used to be an important factor. Is it still around? If so will a loan go through hardship, then grace and come out the other end still Neverlate?

[.Ryan.]

Can't wait to see the NAR drop like a rock now that the first wave of hardship loans will be going through the formal delinquency accounting process.

Always found it odd that they were not counted as such in the first place.

[rj2]

Yup. I ended up buying a bunch of "hardship" loans by accident because they passed my "neverlate" filter, even though they hadn't actually been paid in a couple months.