"Credit for Ineligible Loan"

[lascott]

13 out of 1500+ ... but that number has risen everytime I looked today.

[Randawl]

So what is going to happen with the loans now?  Is LC going to package and sell them to someone else now or hold them on their books?

I wonder what this "system error" was and think of how incredibly easy it would be to claim "system error" for a multitude of questionable actions.

I also wonder how they would account for this in their SEC filings, because we just got paid interest (and principal) directly by LC instead of the borrower.

[rawraw]

It may have been discovered because of the due diligence with the IPO stuff

[Lovinglifestyle]

It may have been discovered because of the due diligence with the IPO stuff

That was my thought as well.  Now I'm wondering why it would only happen on one day if that is the case.
I have 19 now, out of about 4,678.  That makes 0.41% of issued, currents and lates.
It's weird to have them just disappear, without knowing which ones they were.

[core]

So what is going to happen with the loans now?  Is LC going to package and sell them to someone else now or hold them on their books?

Good question.  Since you mentioned selling, I'm wondering what happened to all of the notes that changed hands on Folio between the time of this mysterious bug and now.  Are they going to go back and unwind all the trades?  (I doubt it.)  So that means sellers who got rid of these "bad" notes early when they went into grace period got screwed, and the buyers hit the jackpot by getting full par value. I haven't received any credits today, for what it's worth.   I find it hard to believe I didn't end up with any of these if ~1% of notes are affected.

I wonder what this "system error" was and think of how incredibly easy it would be to claim "system error" for a multitude of questionable actions.

Indeed.  Interest rates go down, they can just claim "system" error and buy back notes, repackage them under the lower prevailing rates, and issue them back to institutional investors.  LC pockets the difference in the two interest rates and it's risk-free money for them. 

If one uses some imagination one can come up with many scenarios.  What is now painfully clear though is your notes are your notes only as long as Lending Club wants you to have them.  You can lose them at any time, and you will only receive par value even though your good ones might be worth +5% on the open market.

It's odd that this "system error" happened over such a time span without being detected.  Obviously it wasn't a one-day event or else the payment dates wouldn't all be different.  It's odd that they intentionally don't tell us precisely which loans were affected.  Everything about this is odd.

[parker]

Another scenario would be if an "ineligible" note was charged off. Did the investor get a credit for this note?

[ksb1234]

Has anyone had a late, defaulted, or charged off note repurchased? Mine were all current.

[Fred]

So what is going to happen with the loans now?  Is LC going to package and sell them to someone else now or hold them on their books?

Since the loans were not eligible for retail investors, LC might simply offer them to the institutional investors.

Another interesting possibility is to sell them in FOLIOfn, since there is no retail vs. institutional distinctions in FOLIOfn, is there?

The worst case would for LC to hold the loans until they are all paid-off or charged-off.

[Fred]

I also wonder how they would account for this in their SEC filings, because we just got paid interest (and principal) directly by LC instead of the borrower.

I will be looking for some kind of footnotes about this in the next LC 10-K or 10-Q filings.

[DanB]

So what is going to happen with the loans now?  Is LC going to package and sell them to someone else now or hold them on their books?

Good question.  Since you mentioned selling, I'm wondering what happened to all of the notes that changed hands on Folio between the time of this mysterious bug and now.  Are they going to go back and unwind all the trades?  (I doubt it.)  So that means sellers who got rid of these "bad" notes early when they went into grace period got screwed, and the buyers hit the jackpot by getting full par value. I haven't received any credits today, for what it's worth.   I find it hard to believe I didn't end up with any of these if ~1% of notes are affected.

I wonder what this "system error" was and think of how incredibly easy it would be to claim "system error" for a multitude of questionable actions.

Indeed.  Interest rates go down, they can just claim "system" error and buy back notes, repackage them under the lower prevailing rates, and issue them back to institutional investors.  LC pockets the difference in the two interest rates and it's risk-free money for them. 

If one uses some imagination one can come up with many scenarios.  What is now painfully clear though is your notes are your notes only as long as Lending Club wants you to have them.  You can lose them at any time, and you will only receive par value even though your good ones might be worth +5% on the open market.

It's odd that this "system error" happened over such a time span without being detected.  Obviously it wasn't a one-day event or else the payment dates wouldn't all be different.  It's odd that they intentionally don't tell us precisely which loans were affected.  Everything about this is odd.

I'm not sure how you're working out this scenario. So for example let's say I had one of those $25 notes, it wen't IGP & I sold it to you for $15. Today rolls around & I can see one of 2 things happening.

Scenario 1.............nothing happens. I keep $15, you keep the IGP note.
Scenario 2.............they take note from you & return your $15, then temporarily return note to me & remove $15 from my acct. 
                               Then they take note from me, return the $25 initially invested less any interest already paid & do whatever
                                with the note. 

How exactly did the seller get screwed or the buyer hit the jackpot?

[core]

Scenario 2 is far too complicated already as you presented it, and you're neglecting the possibility that it may have changed hands 10 more times after that.  They are not going to do anything like unwinding a whole chain of trades, I guarantee you.  Another company might.  LC can't/won't.  I do have some small experience in having trades unwound here.

Scenario 3 (and the most likely one IMHO):  You keep your $15.  The Folio trade stands.  Lending Club pays me the $25 full par value and takes the IGP note.

[Fred]

Has anyone had a late, defaulted, or charged off note repurchased? Mine were all current.

Mine are all Current status, with IssueDate as early as 13-Aug-2014.  So this has been going on for about 3 months!

[Fred]

When you go to the LoanDetail page, you'll get a "Sorry, you do not have access to this loan" message:

https://www.lendingclub.com/browse/loanDetail.action?loan_id=22471582

[core]

Mine are all Current status, with IssueDate as early as 03-Aug-2014.  So this has been going on for about 3 months!

3 months?  Wow.  That's some "system error".  And isn't that oh-so-special that they are all current notes?  Methinks maybe some deal was reached with somebody and they needed a whole bunch of notes to trade off in a pre-IPO deal.  What better way to get a lot of notes at once than to simply take them... this way newly released loan volume on the retail side isn't affected.  But of course take only the current ones.

Fred how are you finding out exactly which notes were affected?  I thought the credit message doesn't give you a loan ID?  I wish I had a few so I could look into this myself.  I'm interested in how A3 loans being released to retail investors can be a "system error".

There's a small possibility that Folio notes that were in the process of settling when they got snatched away are going to be improperly accounted for.  I say this because Lending Club has a long history of kind of just ignoring Folio implications when coming up with their half-baked ideas, and then knee-jerk fixing things later when someone like me exploits the swiss cheese they left and the complaints roll in.  The seller could end up with the Folio sale price _and_ the LC refund leaving the buyer with nothing.  Unless they run this same job again tomorrow.  Before you say "nah, they couldn't be that incompetent", well just look at the past.  They have proven that they are.  We wouldn't be having this discussion if they weren't.  And I haven't gotten any strange Folio order cancellation messages today as far as I know.

[Fred]

Fred how are you finding out exactly which notes were affected? 

I keep track of my notes daily, so this is just a matter of outer-join between today's notes vs. yesterday's notes -- finding notes that were there yesterday but not today.