Author Topic: What's up with this WebBank thing?  (Read 21837 times)

GS

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Re: What's up with this WebBank thing?
« Reply #30 on: October 02, 2014, 02:22:59 PM »
That flag probably is photoshopped, since it would have to be huge to appear that large in the reflection of the window from that distance.  So what?  Someone "enhanced" the images they use in their advertisements?  That's pretty standard in the professional photography industry, isn't it?  They didn't update their website pics when the moved offices?  Again, who cares?

There are plenty of valid things to criticize LC over ... like decreasing investor returns through (1) knocking off a few days of interest, (2) inexplicably sneaking a "no IRA trading" notice onto the back page of website, (3) holding "approved and funded" notes, that could be issued, near the end of each month, (4) fining INVESTORS 18% if the BORROWER pays 16+ days late, (5) increasingly lackadaisical collection efforts, etc ... These are all things that have changed in the last 20 months since I started participating, and they all eat away at returns.  It's concerning to me that if this much has changed in recent times, to the detriment of investors, where are we headed with this?


I'm more concerned about that, than solving the "who photoshopped the flag" conspiracy theory. 
« Last Edit: October 02, 2014, 02:24:42 PM by GS »

DanB

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Re: Re: What's up with this WebBank thing?
« Reply #31 on: October 02, 2014, 04:20:36 PM »

And your statement is misleading as well because the scenario you suggest has never been tested & presupposes that there is much upside room available. What is the highest rate charged today in this near zero interest rate environment?  24%, 25%? What do you suspect the rates will be be when the time comes where you can roll into a bank & get a three year & five year CD at 3%-5%? You think that the ever increasing number of borrowers needed by p2p will support a 27-29% top rate? Really because I'm certain the current type of borrowers, (80% of whom supposedly consolidate or pay off credit) will have little appetite for rates above their MC/Visa.  What policy code number will they call these sub 640 individuals?  What type of annual default numbers will these guys have?
So now your saying that your credit card rates aren't floating. Well I can't speak for the one percent, but all ten of mine are also variable rate.

No, that is not what I am saying. Please read my post again.

rawraw

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Re: What's up with this WebBank thing?
« Reply #32 on: October 02, 2014, 04:31:20 PM »
Do you have reason to believe that rising rates will increase the default rates of prime borrowers?

DanB

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Re: What's up with this WebBank thing?
« Reply #33 on: October 03, 2014, 01:58:17 AM »
Do you have reason to believe that rising rates will increase the default rates of prime borrowers?

None whatsoever. But are we calling these people "prime borrowers" too now? That  term has been getting seriously abused ever since p2p started.  660 Fico is called Prime Consumer Notes? What a joke.

lascott

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Re: What's up with this WebBank thing?
« Reply #34 on: October 03, 2014, 02:21:49 AM »
Do you have reason to believe that rising rates will increase the default rates of prime borrowers?
None whatsoever. But are we calling these people "prime borrowers" too now? That  term has been getting seriously abused ever since p2p started.  660 Fico is called Prime Consumer Notes? What a joke.

It is interesting that whatever FICO score you want to consider prime consumers that you can find them across all grades.



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

AnilG

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Re: What's up with this WebBank thing?
« Reply #35 on: October 03, 2014, 02:58:45 AM »
Those who believe lending on Lending Club is less risky should consider reading about subprime crisis and role of securitization in the crisis. Following quote from Federal Reserve paper is very telling about the incentive mis-alignment with "originate-to-distribute" model. LC platform is using the same "originate-to-distribute" model that led to problems in mortgage market. The undoing of Lending Club will be lowering of standards in screening applicants. Once LC goes public, the pressure to meet quarterly targets will lead to it sooner or later.

The Rise in Mortgage Defaults http://www.federalreserve.gov/pubs/feds/2008/200859/200859pap.pdf
Did Securitization Lead to Lax Screening? Evidence from Subprime Loans http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1093137

Quote
We then consider incentives in the mortgage market, which during the 2000s shifted to an “originate-to-distribute” model, under which mortgage brokers originated loans and then sold them to institutions that securitized them. As brokers did not bear the ultimate costs of default, they may have had a lower incentive to screen applicants carefully (Keys, Mukherjee, Seru, and Vig, 2008). We find that underwriting deteriorated along several dimensions: more loans were originated to borrowers with very small down payments and little or no documentation of their income or assets, in particular. The final culprit we consider is changes in underlying macroeconomic conditions such as interest rates, unemployment, and house prices. We find substantial evidence that declines in house prices are a key factor in the current problems facing the mortgage market.
---
Anil Gupta
PeerCube Thoughts blog https://www.peercube.com/blog
PeerCube https://www.peercube.com

DanB

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Re: What's up with this WebBank thing?
« Reply #36 on: October 03, 2014, 06:07:24 AM »
Those who believe lending on Lending Club is less risky should consider reading about subprime crisis and role of securitization in the crisis. Following quote from Federal Reserve paper is very telling about the incentive mis-alignment with "originate-to-distribute" model. LC platform is using the same "originate-to-distribute" model that led to problems in mortgage market. The undoing of Lending Club will be lowering of standards in screening applicants. Once LC goes public, the pressure to meet quarterly targets will lead to it sooner or later.

The Rise in Mortgage Defaults http://www.federalreserve.gov/pubs/feds/2008/200859/200859pap.pdf
Did Securitization Lead to Lax Screening? Evidence from Subprime Loans http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1093137

Quote
We then consider incentives in the mortgage market, which during the 2000s shifted to an “originate-to-distribute” model, under which mortgage brokers originated loans and then sold them to institutions that securitized them. As brokers did not bear the ultimate costs of default, they may have had a lower incentive to screen applicants carefully (Keys, Mukherjee, Seru, and Vig, 2008). We find that underwriting deteriorated along several dimensions: more loans were originated to borrowers with very small down payments and little or no documentation of their income or assets, in particular. The final culprit we consider is changes in underlying macroeconomic conditions such as interest rates, unemployment, and house prices. We find substantial evidence that declines in house prices are a key factor in the current problems facing the mortgage market.

I agree. In fact I'd contend that we are already in the early ongoing lowering of standards period. Note the average returns continuing to decline. Also, remember when LC emphatically & proudly touted how only the very best 10% of borrowers were approved? Remember when they had a running count  that showed how many people applied, how many were rejected & how many approved?  I remember all that being easily located on the site back when I started in late 2009. Where is all that now? Does anyone at LC even talk about any of that anymore?


rawraw

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Re: What's up with this WebBank thing?
« Reply #37 on: October 03, 2014, 07:02:32 AM »
Do you have reason to believe that rising rates will increase the default rates of prime borrowers?

None whatsoever. But are we calling these people "prime borrowers" too now? That  term has been getting seriously abused ever since p2p started.  660 Fico is called Prime Consumer Notes? What a joke.
Because I'm having trouble following your rational.  You seem to be tweaking all these variables in your question and I'm not understanding the order. You are mentioning rate limits, policy code numbers, etc.  Let's just assume for simplicity rates rise a parallel 400 bps immediately (which would return it to the long term average-ish).

1) All index rates rise 400 bps at all maturities.
2) Lending Club Rates Rise 400 bps at all credit grades ( no usury limits because of Utah)
3) Credit Card Rates Rise 400 BPS for all borrowers
4) Default Rates are largely unimpacted by the rising rates

So the exact same borrower with A1 rating now has 10.03 interest rate instead of 6.03 percent.  If default rates remain constant, the net return roughly increases 4 percent.  So an investor who just wanted a certain return (for example 12), could actually get it with less credit risk than before.  But the top rate borrowers also have moved up.

So I'm struggling to understand your question.  Which of the 4 are you concerned with?  These are potential concerns, but you haven't explicitly mentioned any

1) Non-parallel yield curve shift that significantly impacts the returns due to the different index rates
2) Lending Club has a correlation coefficient (ultimately the midpoint rate used) of less than 100. 
4) Default rates are impacted.


rawraw

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Re: What's up with this WebBank thing?
« Reply #38 on: October 03, 2014, 07:03:33 AM »
Those who believe lending on Lending Club is less risky should consider reading about subprime crisis and role of securitization in the crisis. Following quote from Federal Reserve paper is very telling about the incentive mis-alignment with "originate-to-distribute" model. LC platform is using the same "originate-to-distribute" model that led to problems in mortgage market. The undoing of Lending Club will be lowering of standards in screening applicants. Once LC goes public, the pressure to meet quarterly targets will lead to it sooner or later.

The Rise in Mortgage Defaults http://www.federalreserve.gov/pubs/feds/2008/200859/200859pap.pdf
Did Securitization Lead to Lax Screening? Evidence from Subprime Loans http://papers.ssrn.com/sol3/papers.cfm?abstract_id=1093137

Quote
We then consider incentives in the mortgage market, which during the 2000s shifted to an “originate-to-distribute” model, under which mortgage brokers originated loans and then sold them to institutions that securitized them. As brokers did not bear the ultimate costs of default, they may have had a lower incentive to screen applicants carefully (Keys, Mukherjee, Seru, and Vig, 2008). We find that underwriting deteriorated along several dimensions: more loans were originated to borrowers with very small down payments and little or no documentation of their income or assets, in particular. The final culprit we consider is changes in underlying macroeconomic conditions such as interest rates, unemployment, and house prices. We find substantial evidence that declines in house prices are a key factor in the current problems facing the mortgage market.

I agree. In fact I'd contend that we are already in the early ongoing lowering of standards period. Note the average returns continuing to decline. Also, remember when LC emphatically & proudly touted how only the very best 10% of borrowers were approved? Remember when they had a running count  that showed how many people applied, how many were rejected & how many approved?  I remember all that being easily located on the site back when I started in late 2009. Where is all that now? Does anyone at LC even talk about any of that anymore?
And yes, LC getting involved in subprime borrowers has made me not the happiest.

DanB

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Re: What's up with this WebBank thing?
« Reply #39 on: October 03, 2014, 09:44:41 AM »
Do you have reason to believe that rising rates will increase the default rates of prime borrowers?

None whatsoever. But are we calling these people "prime borrowers" too now? That  term has been getting seriously abused ever since p2p started.  660 Fico is called Prime Consumer Notes? What a joke.
Because I'm having trouble following your rational.  You seem to be tweaking all these variables in your question and I'm not understanding the order. You are mentioning rate limits, policy code numbers, etc.  Let's just assume for simplicity rates rise a parallel 400 bps immediately (which would return it to the long term average-ish).

1) All index rates rise 400 bps at all maturities.
2) Lending Club Rates Rise 400 bps at all credit grades ( no usury limits because of Utah)
3) Credit Card Rates Rise 400 BPS for all borrowers
4) Default Rates are largely unimpacted by the rising rates

So the exact same borrower with A1 rating now has 10.03 interest rate instead of 6.03 percent.  If default rates remain constant, the net return roughly increases 4 percent.  So an investor who just wanted a certain return (for example 12), could actually get it with less credit risk than before.  But the top rate borrowers also have moved up.

So I'm struggling to understand your question.  Which of the 4 are you concerned with?  These are potential concerns, but you haven't explicitly mentioned any

1) Non-parallel yield curve shift that significantly impacts the returns due to the different index rates
2) Lending Club has a correlation coefficient (ultimately the midpoint rate used) of less than 100. 
4) Default rates are impacted.

Normally when someone starts a post with the word "because", it's an indication that they are answering a question. I'm sorry, but I just don't see the connection in this case. I don't normally hold people to this conventional behavior.............but am pointing it out to highlight your rather interesting comment of you having problems following me! But I apologize nonetheless. My mind tends to function on multiple levels simultaneously. I can understand why some may find it challenging to follow.  :)

I also find it interesting that you've chosen to pose your question within the confines of the 1 group of borrowers (A1) which are of the least interest to most readers here. Besides, I believe I've already answered that question when I said "none whatsoever" in response to your question about the default rates of prime borrowers, Of course I mean true prime & not this collective mishmash of borrowers which LC calls "prime consumers", a categorization so broad that it includes lots of people who I wouldn't trust lending $35 to ............to say nothing of $35k.


rawraw

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Re: Re: What's up with this WebBank thing?
« Reply #40 on: October 03, 2014, 10:53:54 AM »
Do you have reason to believe that rising rates will increase the default rates of prime borrowers?

None whatsoever. But are we calling these people "prime borrowers" too now? That  term has been getting seriously abused ever since p2p started.  660 Fico is called Prime Consumer Notes? What a joke.
Because I'm having trouble following your rational.  You seem to be tweaking all these variables in your question and I'm not understanding the order. You are mentioning rate limits, policy code numbers, etc.  Let's just assume for simplicity rates rise a parallel 400 bps immediately (which would return it to the long term average-ish).

1) All index rates rise 400 bps at all maturities.
2) Lending Club Rates Rise 400 bps at all credit grades ( no usury limits because of Utah)
3) Credit Card Rates Rise 400 BPS for all borrowers
4) Default Rates are largely unimpacted by the rising rates

So the exact same borrower with A1 rating now has 10.03 interest rate instead of 6.03 percent.  If default rates remain constant, the net return roughly increases 4 percent.  So an investor who just wanted a certain return (for example 12), could actually get it with less credit risk than before.  But the top rate borrowers also have moved up.

So I'm struggling to understand your question.  Which of the 4 are you concerned with?  These are potential concerns, but you haven't explicitly mentioned any

1) Non-parallel yield curve shift that significantly impacts the returns due to the different index rates
2) Lending Club has a correlation coefficient (ultimately the midpoint rate used) of less than 100. 
4) Default rates are impacted.

Normally when someone starts a post with the word "because", it's an indication that they are answering a question. I'm sorry, but I just don't see the connection in this case. I don't normally hold people to this conventional behavior.............but am pointing it out to highlight your rather interesting comment of you having problems following me! But I apologize nonetheless. My mind tends to function on multiple levels simultaneously. I can understand why some may find it challenging to follow.  :)

I also find it interesting that you've chosen to pose your question within the confines of the 1 group of borrowers (A1) which are of the least interest to most readers here. Besides, I believe I've already answered that question when I said "none whatsoever" in response to your question about the default rates of prime borrowers, Of course I mean true prime & not this collective mishmash of borrowers which LC calls "prime consumers", a categorization so broad that it includes lots of people who I wouldn't trust lending $35 to ............to say nothing of $35k.
Well you just seem like you want to complain instead of think. Now I see why you haven't gotten meaningful responses. I realize now I'm wasting my time trying to understand your concern.

bobeubanks

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Re: Re: What's up with this WebBank thing?
« Reply #41 on: October 03, 2014, 02:00:08 PM »
So now your saying that your credit card rates aren't floating. Well I can't speak for the one percent, but all ten of mine are also variable rate.

Credit card rates do float, but the average credit card rate does not exactly follow prime rates.

DanB

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Re: Re: What's up with this WebBank thing?
« Reply #42 on: October 03, 2014, 07:14:03 PM »
Do you have reason to believe that rising rates will increase the default rates of prime borrowers?

None whatsoever. But are we calling these people "prime borrowers" too now? That  term has been getting seriously abused ever since p2p started.  660 Fico is called Prime Consumer Notes? What a joke.
Because I'm having trouble following your rational.  You seem to be tweaking all these variables in your question and I'm not understanding the order. You are mentioning rate limits, policy code numbers, etc.  Let's just assume for simplicity rates rise a parallel 400 bps immediately (which would return it to the long term average-ish).

1) All index rates rise 400 bps at all maturities.
2) Lending Club Rates Rise 400 bps at all credit grades ( no usury limits because of Utah)
3) Credit Card Rates Rise 400 BPS for all borrowers
4) Default Rates are largely unimpacted by the rising rates

So the exact same borrower with A1 rating now has 10.03 interest rate instead of 6.03 percent.  If default rates remain constant, the net return roughly increases 4 percent.  So an investor who just wanted a certain return (for example 12), could actually get it with less credit risk than before.  But the top rate borrowers also have moved up.

So I'm struggling to understand your question.  Which of the 4 are you concerned with?  These are potential concerns, but you haven't explicitly mentioned any

1) Non-parallel yield curve shift that significantly impacts the returns due to the different index rates
2) Lending Club has a correlation coefficient (ultimately the midpoint rate used) of less than 100. 
4) Default rates are impacted.

Normally when someone starts a post with the word "because", it's an indication that they are answering a question. I'm sorry, but I just don't see the connection in this case. I don't normally hold people to this conventional behavior.............but am pointing it out to highlight your rather interesting comment of you having problems following me! But I apologize nonetheless. My mind tends to function on multiple levels simultaneously. I can understand why some may find it challenging to follow.  :)

I also find it interesting that you've chosen to pose your question within the confines of the 1 group of borrowers (A1) which are of the least interest to most readers here. Besides, I believe I've already answered that question when I said "none whatsoever" in response to your question about the default rates of prime borrowers, Of course I mean true prime & not this collective mishmash of borrowers which LC calls "prime consumers", a categorization so broad that it includes lots of people who I wouldn't trust lending $35 to ............to say nothing of $35k.
Well you just seem like you want to complain instead of think. Now I see why you haven't gotten meaningful responses. I realize now I'm wasting my time trying to understand your concern.

Shockingly, I'm quite able to handle thinking & complaining simultaneously. I've not come here asking for "meaningful responses". I'm confident that in time enough of the concerns myself (& others) are bringing up now will be shown to have been accurate & valid. History will judge whether you're wise or a fool for dismissing it as mere complaining & I'm perfectly willing to wait for that verdict.
« Last Edit: October 03, 2014, 07:16:40 PM by DanB »

core

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Re: What's up with this WebBank thing?
« Reply #43 on: October 03, 2014, 08:29:54 PM »
Are you guys seriously bickering about what 400 basis points are going to do?  I can't really tell from reading the exchange.  I don't know, that doesn't seem like much to me.  If you're $30k in CC debt that's $100/mo.  If $100 causes someone to default that's pretty sad.  Strap on a leaf blower for 2 hours on some Saturday and it's earned.  Or stand on a street corner for 15 mins if you've got those kind of skills.

Whatever happens though, it won't happen overnight.  Rates are not going to go up 4% in one meeting.  Keep your ears open, and when you hear the music from the ice cream truck you will have time to run for cover.  Those ice cream trucks are usually driven by perverts anyway so this is wise action in any environment.

I would be much more concerned with the collection log notes we will soon see:

11/07/14 Borrower deceased
11/02/14 Borrower diagnosed with ebola

or

11/11/14 Borrower beheaded

DanB

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Re: What's up with this WebBank thing?
« Reply #44 on: October 03, 2014, 10:55:50 PM »
Are you guys seriously bickering about what 400 basis points are going to do?  I can't really tell from reading the exchange.  I don't know, that doesn't seem like much to me.  If you're $30k in CC debt that's $100/mo. If $100 causes someone to default that's pretty sad. Strap on a leaf blower for 2 hours on some Saturday and it's earned.  Or stand on a street corner for 15 mins if you've got those kind of skills.

Whatever happens though, it won't happen overnight.  Rates are not going to go up 4% in one meeting.  Keep your ears open, and when you hear the music from the ice cream truck you will have time to run for cover.  Those ice cream trucks are usually driven by perverts anyway so this is wise action in any environment.

I would be much more concerned with the collection log notes we will soon see:

11/07/14 Borrower deceased
11/02/14 Borrower diagnosed with ebola

or

11/11/14 Borrower beheaded

Me bickering, never!  On the other hand I do take issue with the suggestion that anyone in your part of the country can make $100 by strapping on a leaf blower for just 2 hours on a Saturday.   
Wow, I didn't know the ice cream truck thing was a sort of universal constant. Good to know.  :)