Author Topic: Recent and Upcoming Changes on the Lending Club Platform  (Read 13065 times)

Randawl

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Recent and Upcoming Changes on the Lending Club Platform
« on: August 20, 2014, 06:59:11 PM »
http://kb.lendingclub.com/siteupdates/articles/Site_Updates/Recent-and-Upcoming-Changes-on-the-Lending-Club-Platform-August-2014


Some highlights:

Estimated charge-off rates were slightly lowered, except for B which increased.


Not too thrilled about the changes to collection fees:
Quote
• 18% of the delinquent amount recovered if the loan is at least 16 days late and no litigation is involved
• 30% of attorneys’ hourly fees, plus costs in the event litigation is involved

The ever-shifting credit policies:

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• As of August 20, 2014, a credit report must reflect 5 or fewer inquiries (or recently opened accounts) in the last 6 months.  This reduces the maximum allowable number of inquiries in the past 6 months from 6 to 5. In addition, the definition of “inquiry” was updated to exclude credit inquiries related to auto and mortgage loans.  The updated definition will be reflected in loan information for all loans issued on or after August 20, 2014. The updated definition does not apply to loans issued before August 20, 2014.
• On July 25, 2014, the maximum debt-to-income (“DTI”) ratio (excluding mortgage) changed from 35% to 40%.

I am glad they have addressed the prepayment issue that can result in negative returns:

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Beginning in Q4 2014, we will limit the size of the service fee charged to an investor during the first 12 months after a Note is issued in order to protect investor returns in the event of a prepayment.  For those 12 months, an investor will never pay a service fee greater than 1% of the contractual monthly payment amount.
« Last Edit: August 20, 2014, 07:09:31 PM by Randawl »

AnilG

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Re: Recent and Upcoming Changes on the Lending Club Platform
« Reply #1 on: August 20, 2014, 07:21:18 PM »
I miss DanB. I can just imagine his reaction to these changes. He is typically on the money.
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Randawl

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Re: Recent and Upcoming Changes on the Lending Club Platform
« Reply #2 on: August 20, 2014, 08:13:27 PM »
I miss DanB. I can just imagine his reaction to these changes. He is typically on the money.

I was thinking the same thing - core, too!

bobeubanks

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Re: Recent and Upcoming Changes on the Lending Club Platform
« Reply #3 on: August 20, 2014, 08:32:07 PM »
Whatever happened to Core?

AnilG

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Re: Recent and Upcoming Changes on the Lending Club Platform
« Reply #4 on: August 20, 2014, 08:47:42 PM »
core had core-dump. /geek humor

Whatever happened to Core?
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Fred

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Re: Recent and Upcoming Changes on the Lending Club Platform
« Reply #5 on: August 20, 2014, 09:24:45 PM »
http://kb.lendingclub.com/siteupdates/articles/Site_Updates/Recent-and-Upcoming-Changes-on-the-Lending-Club-Platform-August-2014
Quote
• On July 25, 2014, the maximum debt-to-income (“DTI”) ratio (excluding mortgage) changed from 35% to 40%.

This max DTI change has been implemented for about a month now.

It would be nice if LC announced any policy changes prior to implementing them.  They need to learn this prior to IPO.

Randawl

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Re: Recent and Upcoming Changes on the Lending Club Platform
« Reply #6 on: August 20, 2014, 09:43:53 PM »
http://kb.lendingclub.com/siteupdates/articles/Site_Updates/Recent-and-Upcoming-Changes-on-the-Lending-Club-Platform-August-2014
Quote
• On July 25, 2014, the maximum debt-to-income (“DTI”) ratio (excluding mortgage) changed from 35% to 40%.

This max DTI change has been implemented for about a month now.

It would be nice if LC announced any policy changes prior to implementing them. 

Par for the course, eh?

turing

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Re: Recent and Upcoming Changes on the Lending Club Platform
« Reply #7 on: August 21, 2014, 10:50:20 AM »
Quote
Beginning in Q4 2014, we will limit the size of the service fee charged to an investor during the first 12 months after a Note is issued in order to protect investor returns in the event of a prepayment.  For those 12 months, an investor will never pay a service fee greater than 1% of the contractual monthly payment amount.

Very glad to see this change.  This should put to rest some of the discussion about fully paid loans being good or bad for the investor.  Now, it should never be a net negative to investors with more service fees than interest on some of the fully paid loans.

rawraw

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Re: Recent and Upcoming Changes on the Lending Club Platform
« Reply #8 on: August 21, 2014, 03:00:05 PM »
The DTI expansion makes me a little nervous

Thatguybil

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Re: Recent and Upcoming Changes on the Lending Club Platform
« Reply #9 on: August 21, 2014, 10:01:57 PM »
The DTI expansion makes me a little nervous

No doubt!
Plus it excludes mortgage debt which makes no sense.

hoggy1

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Re: Recent and Upcoming Changes on the Lending Club Platform
« Reply #10 on: August 22, 2014, 07:19:05 AM »
It doesn't cover rent either. Just heard an NPR story saying that 36% (I think?) of renters were paying over 1/3 of their income on rent and in some parts of Florida the average renter paid over 50% of income for housing. The increase will allow more crummy loans to post. I filter out loans where DTI + PTI > 35% (Payment To Income ie DTI including this loan <35%) but I might have to loosen this soon to put more money to work.
Steve

DanB

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Re: Recent and Upcoming Changes on the Lending Club Platform
« Reply #11 on: August 22, 2014, 08:30:45 AM »
I miss DanB. I can just imagine his reaction to these changes. He is typically on the money.

Hi Anil,
          Pls. feel free to go here to read one of my last posts of the year.

http://www.lendacademy.com/forum/index.php?topic=2596.0

rawraw

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Re: Recent and Upcoming Changes on the Lending Club Platform
« Reply #12 on: August 22, 2014, 08:58:57 AM »
I miss DanB. I can just imagine his reaction to these changes. He is typically on the money.

Hi Anil,
          Pls. feel free to go here to read one of my last posts of the year.

http://www.lendacademy.com/forum/index.php?topic=2596.0
For what it's worth, I miss the majority of your critiques and you tended to be easier to follow than Core ha ha.  This place is a little too optimistic about a risky asset class IMO.  The change in DTI is one example of something that probably should be highlighted and thought about, but the response has been minimal.

The DTI expansion makes me a little nervous

No doubt!
Plus it excludes mortgage debt which makes no sense.
What LC isn't letting you know now is that due to this change, I bet some "subprime" borrowers will qualify for low grade tiers.  I use subprime loosely, as there isn't really one definition for it.  One of the benchmarks for subprime has historically been a DTI of 50%.  When you exclude a mortgage, having a 40% ceiling wouldn't be too hard to actually exceed 50%. 

Quote
A third nearly universal attribute of a subprime loan is a borrower’s high debt-to-income ratio, typically 50% or more (i.e., the borrower spends 50% or more of their income on outstanding loans and credit card debt, for example).

lascott

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Re: Recent and Upcoming Changes on the Lending Club Platform
« Reply #13 on: August 22, 2014, 09:47:23 AM »
The change in DTI is one example of something that probably should be highlighted and thought about, but the response has been minimal.
If people are already filtering on Debt-To-Income(DTI) and/or Loan-Payment-To-Incom(LPTI) then they may thing the change does not affect them.  Or they now just added a DTI limit to avoid some of the new "subprime" borrowers notes.  I do this with LendingRobot and I was "assuming" that it would not affect P2P-Picks (that I used through BlueVestment).

Personally I appreciate when folks remind us of the risk we are taking an I am coming to appreciate it by adjusting my rules/criteria as well as buying some selective A's and B's.  I think CircleT009 raised my appreciation for them as well ( http://www.lendacademy.com/forum/index.php?topic=2235.msg21229#msg21229 ).
« Last Edit: August 22, 2014, 09:49:11 AM by lascott »
Tools I use: (main) BlueVestment: https://www.bluevestment.com/app/pricing + https://www.interestradar.com/ , (others) Lending Robot referral link: https://www.lendingrobot.com/ref/scott473/  & Peercube referral code: DFVA9Y

rawraw

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Re: Recent and Upcoming Changes on the Lending Club Platform
« Reply #14 on: August 22, 2014, 11:25:59 AM »
The change in DTI is one example of something that probably should be highlighted and thought about, but the response has been minimal.
If people are already filtering on Debt-To-Income(DTI) and/or Loan-Payment-To-Incom(LPTI) then they may thing the change does not affect them.  Or they now just added a DTI limit to avoid some of the new "subprime" borrowers notes.  I do this with LendingRobot and I was "assuming" that it would not affect P2P-Picks (that I used through BlueVestment).

Personally I appreciate when folks remind us of the risk we are taking an I am coming to appreciate it by adjusting my rules/criteria as well as buying some selective A's and B's.  I think CircleT009 raised my appreciation for them as well ( http://www.lendacademy.com/forum/index.php?topic=2235.msg21229#msg21229 ).
Remember, your risk isn't isolated to the notes.  It's something that even I tend to forget.  The risk to the platform, and the viability of your notes is also a risk.  If LC makes a stupid decision, it could take down the platform regardless of your individual credit risk.  I know the 10-K discusses their arrangements for contingency, but there is a lot of unknowns in that situation.  At any rate, it's a type of situation I'm sure most of us would not want considerable sums tied up in.