Author Topic: Loss Mitigation Strategies  (Read 12086 times)

brycemason

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Re: Loss Mitigation Strategies
« Reply #15 on: November 20, 2012, 06:32:40 PM »
As far as I can understand, the initial investors in loans have the ability to find notes that are in so-called "pre-grace." That is, they can tell a day or two ahead of time that a note will go "in grace period" but the investors on FolioN will see the loan as "current." This is asymmetric.

SeanMcD

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Re: Loss Mitigation Strategies
« Reply #16 on: November 20, 2012, 07:31:00 PM »
All the information being discussed is in the Payment History of the note.  There is no additional information available to initial investors.

Keltset

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Re: Loss Mitigation Strategies
« Reply #17 on: November 20, 2012, 07:47:31 PM »
As far as I can understand, the initial investors in loans have the ability to find notes that are in so-called "pre-grace." That is, they can tell a day or two ahead of time that a note will go "in grace period" but the investors on FolioN will see the loan as "current." This is asymmetric.

You can do the same math by looking at the note itself in the payment history section by looking at the date it entered "processing payment" to and count the days up until 'insert whatever day today is'. This is the what is happening here and not an official change of the notes status itself. To the seller the note also appears "current".
« Last Edit: November 20, 2012, 07:49:47 PM by Keltset »

SarahV

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Re: Loss Mitigation Strategies
« Reply #18 on: November 20, 2012, 09:54:13 PM »
Yes, it's not asymmetric at all. I see the same info as a buyer or seller on Folio. I learned the hard way after buying a heavily discounted note or two that immediately went into grace period the next morning. After that I paid careful attention and figured out how it worked. Anyone else can do the same.

Sean: thanks for the tip on the date. I will keep that in mind!

brycemason

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Re: Loss Mitigation Strategies
« Reply #19 on: November 20, 2012, 10:28:23 PM »
Thanks for helping me understand. I've stayed clear of folioN thus far. What's the magic days processing, 4?

rawraw

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Re: Loss Mitigation Strategies
« Reply #20 on: November 21, 2012, 06:00:41 AM »
Thanks for helping me understand. I've stayed clear of folioN thus far. What's the magic days processing, 4?
4 business days, excluding holidays and etc.  That's how long it takes the ACH to clear.  And the clear in California time, so its normally late the fourth day for me (Central time zone).
« Last Edit: November 21, 2012, 06:03:45 AM by rawraw »

rawraw

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Re: Loss Mitigation Strategies
« Reply #21 on: November 21, 2012, 06:03:08 AM »
I also monitor the FICOs of my portfolio weekly.  I sit down and look at all the trends.  I do mostly credit card refinancing loans.  If I see the FICO trending downward or the new level of FICO no longer justify the interest rate (650 FICO whom got a Grade A loan), I'll sell these in the FolioFN as well.  They sell quicker than the above loans, but I rarely take losses on either.

Why do you monitor these weekly?  From what I've seen, the score is only updated once per month, and scores for all loans are updated on the same day.
Because I don't go through all 300+ notes each week.  I go through roughly a fourth.  Lending Club makes it a few clicks to see each individual FICO trend.

As for why I think FICO is important, I have seen analysis where FICO is correlated with risk.  But this isn't my reason.  I do credit card refinancing loans almost exclusively.  Generally you'll see a FICO bump after turning those credit cards into installment loans.  Since we don't know these people in person (like a loan officer), the FICO is the best way I can use to monitor if they actually cut up those credit cards or if they seem to be increasing in risk afterwards.

SeanMcD

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Re: Loss Mitigation Strategies
« Reply #22 on: November 21, 2012, 08:55:39 PM »
I also monitor the FICOs of my portfolio weekly.  I sit down and look at all the trends.  I do mostly credit card refinancing loans.  If I see the FICO trending downward or the new level of FICO no longer justify the interest rate (650 FICO whom got a Grade A loan), I'll sell these in the FolioFN as well.  They sell quicker than the above loans, but I rarely take losses on either.

Why do you monitor these weekly?  From what I've seen, the score is only updated once per month, and scores for all loans are updated on the same day.
Because I don't go through all 300+ notes each week.  I go through roughly a fourth.  Lending Club makes it a few clicks to see each individual FICO trend.

As for why I think FICO is important, I have seen analysis where FICO is correlated with risk.  But this isn't my reason.  I do credit card refinancing loans almost exclusively.  Generally you'll see a FICO bump after turning those credit cards into installment loans.  Since we don't know these people in person (like a loan officer), the FICO is the best way I can use to monitor if they actually cut up those credit cards or if they seem to be increasing in risk afterwards.

No argument from me about FICO's importance - I've sold a few loans where the FICO dropped dramatically over a couple of months, and they appear to be headed for default now. 

A faster method than going through all of your notes is to open the Sell Notes page in FolioFn.  Credit score change is shown in list form there, so after sort your loans by that column, you only need to check out the loans trending downward.

rawraw

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Re: Loss Mitigation Strategies
« Reply #23 on: November 22, 2012, 05:46:06 AM »
I also monitor the FICOs of my portfolio weekly.  I sit down and look at all the trends.  I do mostly credit card refinancing loans.  If I see the FICO trending downward or the new level of FICO no longer justify the interest rate (650 FICO whom got a Grade A loan), I'll sell these in the FolioFN as well.  They sell quicker than the above loans, but I rarely take losses on either.

Why do you monitor these weekly?  From what I've seen, the score is only updated once per month, and scores for all loans are updated on the same day.
Because I don't go through all 300+ notes each week.  I go through roughly a fourth.  Lending Club makes it a few clicks to see each individual FICO trend.

As for why I think FICO is important, I have seen analysis where FICO is correlated with risk.  But this isn't my reason.  I do credit card refinancing loans almost exclusively.  Generally you'll see a FICO bump after turning those credit cards into installment loans.  Since we don't know these people in person (like a loan officer), the FICO is the best way I can use to monitor if they actually cut up those credit cards or if they seem to be increasing in risk afterwards.

No argument from me about FICO's importance - I've sold a few loans where the FICO dropped dramatically over a couple of months, and they appear to be headed for default now. 

A faster method than going through all of your notes is to open the Sell Notes page in FolioFn.  Credit score change is shown in list form there, so after sort your loans by that column, you only need to check out the loans trending downward.
I used to do that, but I noticed on some loans the payment histories updated with information (failed payment, etc) before it was displayed.  I was able to sell these loans on the secondary market for part.  So now I randomly check all notes periodically, as I noticed I wasn't being alerted to correspondence in the loan files (it'd be nice to get an alert or something).  It doesn't take much time when spread out a little bit each day.


yojoakak

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Re: Loss Mitigation Strategies
« Reply #24 on: November 22, 2012, 09:55:44 AM »
As for why I think FICO is important, I have seen analysis where FICO is correlated with risk.  But this isn't my reason.  I do credit card refinancing loans almost exclusively.  Generally you'll see a FICO bump after turning those credit cards into installment loans.  Since we don't know these people in person (like a loan officer), the FICO is the best way I can use to monitor if they actually cut up those credit cards or if they seem to be increasing in risk afterwards.

I've heard that FICO scores can actually go down when someone pays off their credit card and/or closes the account. Is that true? If so, then a declining FICO score after a debt consolidation would not be surprising.

Keltset

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Re: Loss Mitigation Strategies
« Reply #25 on: November 22, 2012, 01:31:49 PM »
An immediate minor drop can be expected when opening a new line of credit and paying off old debt. The drop comes from the total allowable debt. This should recover though and the dip should be quick and near immediate and not a continual trend. The only reason it would continue to trend down after the initial impact of the new loan and payoff would be from a continued increase in debt to available credit [or other normal negative factors like late payments]. This would indicate that the borrower is actually increasing their debt burden not lowering it. An example could be a payoff of all the debt but then a month or two later they go right back to using those cards creating a potential collapse in their finances by continuing to live outside of their means and not really resolving the issue--- which is generally the intent of a consolidation loan.

rawraw

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Re: Loss Mitigation Strategies
« Reply #26 on: November 23, 2012, 05:11:16 AM »
As for why I think FICO is important, I have seen analysis where FICO is correlated with risk.  But this isn't my reason.  I do credit card refinancing loans almost exclusively.  Generally you'll see a FICO bump after turning those credit cards into installment loans.  Since we don't know these people in person (like a loan officer), the FICO is the best way I can use to monitor if they actually cut up those credit cards or if they seem to be increasing in risk afterwards.

I've heard that FICO scores can actually go down when someone pays off their credit card and/or closes the account. Is that true? If so, then a declining FICO score after a debt consolidation would not be surprising.
Closing an account would decrease the FICO, especially if the accounts are among their oldest or its their largest credit lines.  Closing the CC would make any remaining revolving debt a higher % of available credit and closing old lines would hurt the history.

But Installment debt is rated better than revolving and is around 10% of the score (I think been a while since I checked).  So you'd expect to see Keltset's explanation.

SeanMcD

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Re: Loss Mitigation Strategies
« Reply #27 on: November 28, 2012, 05:46:29 PM »

Sean: thanks for the tip on the date. I will keep that in mind!

Scores for 11/12 are showing today.  I didn't check yesterday, so they were posted on either the 27th or 28th - looks like the trend is back to normal.

rawraw

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Re: Loss Mitigation Strategies
« Reply #28 on: November 28, 2012, 06:13:37 PM »

Sean: thanks for the tip on the date. I will keep that in mind!

Scores for 11/12 are showing today.  I didn't check yesterday, so they were posted on either the 27th or 28th - looks like the trend is back to normal.
GOod info :)

SeanMcD

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Re: Loss Mitigation Strategies
« Reply #29 on: February 01, 2013, 03:00:06 PM »
Sean, what day do they update? They would be useful to know for those of us who like to monitor it.

I've only been watching it for the last 6 months, but so far it's generally been on or near the 27th.  Last month was an anomaly - scores were updated a couple weeks earlier, but that coincided with the release of the new scoring model with narrower FICO bands.  They haven't updated for November yet, so I'm guessing the schedule will be back to normal this month.

Thread necromancy! Just wanted to note that the scores haven't been updated for January yet.  I started with LC in March 2012, so I don't know whether January scores are usually delayed due to all the additional tax document work going on.