Author Topic: Can the notes of whole loans be traded?  (Read 4919 times)

wei155

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Can the notes of whole loans be traded?
« on: November 02, 2019, 12:24:58 AM »
Does anyone know whether notes of whole loans can be traded on LCís trading platform Folio? Just out of curiosity. I heard that only notes from fractional loans can be traded there. Whole loans are traded somewhere else. Is it so?

Fred93

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Re: Can the notes of whole loans be traded?
« Reply #1 on: November 02, 2019, 12:31:56 PM »
Does anyone know whether notes of whole loans can be traded on LCís trading platform Folio? Just out of curiosity. I heard that only notes from fractional loans can be traded there. Whole loans are traded somewhere else. Is it so?

I don't think I've ever tried to trade a whole note, so I don't know for sure whether one can be listed there. 

I've never heard of a restriction tho.  I'll bet they can.  There's nothing special about a whole note.  They're just notes which happen to own one entire loan, rather than a fraction of a loan.

There's something about the secondary market (folio) that you should know.  Almost all of the action there is in the $25 size notes.  You can trade in larger chunks, but there's very little action. 

Sorry I can't be more specific.  The secondary market makes NO trading data available, so no one can tell you how many notes of a certain size have traded.

There are some folks who will buy larger notes tho.  My automated program will buy notes on the secondary market without regard to size.  It just looks at the loan & credit parameters and price.

I did look at notes my program has bought (over several years) on folio.  The largest was a $2600 note.  Out of 20,261 notes bought, 765 of them, ie 3.8% were above $100 size.  That gives you a clue to the size distribution.

lctz

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Re: Can the notes of whole loans be traded?
« Reply #2 on: November 02, 2019, 05:14:40 PM »
I would demand a higher return for whole loan due to risk concentration.  The chance of one $100 note default is higher than equal quality 4 $25 notes default at the same time.

wei155

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Re: Can the notes of whole loans be traded?
« Reply #3 on: November 02, 2019, 10:49:29 PM »
Does anyone know whether notes of whole loans can be traded on LCís trading platform Folio? Just out of curiosity. I heard that only notes from fractional loans can be traded there. Whole loans are traded somewhere else. Is it so?

I don't think I've ever tried to trade a whole note, so I don't know for sure whether one can be listed there. 

I've never heard of a restriction tho.  I'll bet they can.  There's nothing special about a whole note.  They're just notes which happen to own one entire loan, rather than a fraction of a loan.

There's something about the secondary market (folio) that you should know.  Almost all of the action there is in the $25 size notes.  You can trade in larger chunks, but there's very little action. 

Sorry I can't be more specific.  The secondary market makes NO trading data available, so no one can tell you how many notes of a certain size have traded.

There are some folks who will buy larger notes tho.  My automated program will buy notes on the secondary market without regard to size.  It just looks at the loan & credit parameters and price.

I did look at notes my program has bought (over several years) on folio.  The largest was a $2600 note.  Out of 20,261 notes bought, 765 of them, ie 3.8% were above $100 size.  That gives you a clue to the size distribution.

Thank you! The information is very useful. I'm just thinking about why people would buy those notes.

AnilG

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Re: Can the notes of whole loans be traded?
« Reply #4 on: November 04, 2019, 06:20:25 AM »
I donít believe you can sell whole loan on folio. Iirc, Whole loans are not issued as notes. Whole loans are usually sold in package as private transaction. You will need lending club blessing to change the ownership of whole loans. During the hay days, there was a broker service that facilitated whole loan package transaction, I canít recall the name now.

The highest outstanding principal on a note listed on folio recently was in $7,000 range.
« Last Edit: November 04, 2019, 06:22:49 AM by AnilG »
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wei155

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Re: Can the notes of whole loans be traded?
« Reply #5 on: November 04, 2019, 10:56:52 AM »
I donít believe you can sell whole loan on folio. Iirc, Whole loans are not issued as notes. Whole loans are usually sold in package as private transaction. You will need lending club blessing to change the ownership of whole loans. During the hay days, there was a broker service that facilitated whole loan package transaction, I canít recall the name now.

The highest outstanding principal on a note listed on folio recently was in $7,000 range.

Thanks! Is the broker service Crunchbase? I overheard that they allow trades of whole loans.

Fred93

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Re: Can the notes of whole loans be traded?
« Reply #6 on: November 04, 2019, 01:18:51 PM »
I donít believe you can sell whole loan on folio. Iirc, Whole loans are not issued as notes. Whole loans are usually sold in package as private transaction. You will need lending club blessing to change the ownership of whole loans. During the hay days, there was a broker service that facilitated whole loan package transaction, I canít recall the name now.

Terminology is perhaps confusing.  There are "notes" representing "whole loans".  I own many.

Besides notes, LC also sells loans, but to folks such as banks who are set up to meet the various federal and state regulations involved, and not to retail customers.

The folio platform of course only transacts notes.

rawraw

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Re: Can the notes of whole loans be traded?
« Reply #7 on: November 04, 2019, 03:41:48 PM »
How do you own notes for whole loans? J

Fred93

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Re: Can the notes of whole loans be traded?
« Reply #8 on: November 04, 2019, 04:52:53 PM »
How do you own notes for whole loans? J

Notes for whole loans trade on the same web site & API as notes representing fractions of loans.  You just have to ask permission.  I think I had to sign something.  I seem to recall it said that I understood about diversification, or something like that.  Was a  few years ago so I forget the details.  After that, the whole notes became visible and purchasable. 

LC created this system for investment managers, hedge funds, etc long before they created the more recent vehicles (certificates, syndications, sale of loans directly to banks, etc).

Nowadays I believe LC considers all note purchasers to be an anachronism they're letting slowly wither.  They don't allocate enough loans to either the whole or fractional note market.  Whole notes are mostly bought within the first second after they are posted.

AnilG

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Re: Can the notes of whole loans be traded?
« Reply #9 on: November 05, 2019, 06:26:32 AM »
Thanks! Is the broker service Crunchbase? I overheard that they allow trades of whole loans.

Crunchbase is startup information directory, nothing to do with lending or buy/sell service. The service name had weird "one" letter off/change from a proper word.
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AnilG

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Re: Can the notes of whole loans be traded?
« Reply #10 on: November 05, 2019, 06:28:51 AM »
If you have whole loan notes in your portfolio, you could have tried to list one such loan on folio to make all this discussion moot.

Notes for whole loans trade on the same web site & API as notes representing fractions of loans.  You just have to ask permission.  I think I had to sign something.  I seem to recall it said that I understood about diversification, or something like that.  Was a  few years ago so I forget the details.  After that, the whole notes became visible and purchasable. 

LC created this system for investment managers, hedge funds, etc long before they created the more recent vehicles (certificates, syndications, sale of loans directly to banks, etc).

Nowadays I believe LC considers all note purchasers to be an anachronism they're letting slowly wither.  They don't allocate enough loans to either the whole or fractional note market.  Whole notes are mostly bought within the first second after they are posted.
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Anil Gupta
PeerCube Thoughts blog https://www.peercube.com/blog
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Fred93

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Re: Can the notes of whole loans be traded?
« Reply #11 on: November 05, 2019, 12:11:45 PM »
If you have whole loan notes in your portfolio, you could have tried to list one such loan on folio to make all this discussion moot.

I could have, but I'm not the one who wants to know.

rawraw

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Re: Can the notes of whole loans be traded?
« Reply #12 on: November 06, 2019, 08:38:18 AM »
That's interesting. I didn't remember that. I just remembered there being a limit on the amount of a loan note you could fund. Interesting 😊