LC is going to do their own securitizations

[hzhou9]

Its very simple.  LC does not have enough buyers so they have to securitize.  There original business model is not panning out.

Looks like Prosper is hitting the skids-shutting down healthcare and laying off around 100 people.  Good thing their execs cashed out at last round.

I remember your id, and several others - you guys are shorting LC, right? You guys disappeared for a while since LC beat estimate and raise forecast in last ER.
I will say you should just leave - we are discussing LC as retail investors, and look at yourselves, what have you contributed except malicious interpret of everything?

[nonattender]

Looks like Prosper is hitting the skids-shutting down healthcare and laying off around 100 people.

Hmm.  I haven't seen that news.  Got a link?

[newstreet]

Its very simple.  LC does not have enough buyers so they have to securitize.  There original business model is not panning out.

Looks like Prosper is hitting the skids-shutting down healthcare and laying off around 100 people.  Good thing their execs cashed out at last round.

I remember your id, and several others - you guys are shorting LC, right? You guys disappeared for a while since LC beat estimate and raise forecast in last ER.
I will say you should just leave - we are discussing LC as retail investors, and look at yourselves, what have you contributed except malicious interpret of everything?

Malicious interpret of everything??  Get your head out of your butt.  Look at what happened to Prosper today.  Remember my ID buddy-clearly thats more important than the facts. 

[nonattender]

Nice heads up, broad40.  Thx.  I always expect Prosper to screw up, but I never know exactly when the next eruption will occur...

[newstreet]

I truly feel sorry for the employees.  Majority of these fntech companies are run by young guys and funded by young guys with little to no credit or operating experience.  It's all smoke and mirrors and selling the hype. Peter Renton's knowledge is limited as well---but he probably built the most profitable business in the "fintech" world.  Hats off to him for that.

[rawraw]

I truly feel sorry for the employees.  Majority of these fntech companies are run by young guys and funded by young guys with little to no credit or operating experience.  It's all smoke and mirrors and selling the hype. Peter Renton's knowledge is limited as well---but he probably built the most profitable business in the "fintech" world.  Hats off to him for that.

I think this is broadly correct. I used to want to start a more critical version of lendacademy blog, but decided against it. But I still think LC is a good company and an exception in the industry

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[Fred]

Its very simple.  LC does not have enough buyers so they have to securitize.

Hmm ... has LC turned around quickly?   In August 2013, LC had no loans on the platform -- http://www.lendacademy.com/forum/index.php?topic=1484.0.

[hzhou9]

Its very simple.  LC does not have enough buyers so they have to securitize.  There original business model is not panning out.

Looks like Prosper is hitting the skids-shutting down healthcare and laying off around 100 people.  Good thing their execs cashed out at last round.

I remember your id, and several others - you guys are shorting LC, right? You guys disappeared for a while since LC beat estimate and raise forecast in last ER.
I will say you should just leave - we are discussing LC as retail investors, and look at yourselves, what have you contributed except malicious interpret of everything?

Malicious interpret of everything??  Get your head out of your butt.  Look at what happened to Prosper today.  Remember my ID buddy-clearly thats more important than the facts.

Being a loan investor, I would care much about whether LC keeps doing underwriting properly, how LC adjusts rates, which loans to pick, and whether the unemployment keeps low - these are my Fundamentals to look at. Why is "Prosper cutting healthcare staff" interesting to me?

Sorry for saying "Malicious interpret of everything" if it hurts. And I remember your ID just because it always sends posts without useful information, and always with negative tones. I dont want to waste my time arguing with you, and this is my last post to answer this post.

[Rob L]

Really at a loss to understand what's going on here. Securitization of LC loans has been done before; just by Wall Street investment houses and not LC; correct? So now LC will be doing same and cutting out the middle man so to speak. LC has to come up with the money up front to buy the loans; then sells chunks of loan tranches to large investors. Once sold LC has no skin in the game; they just service the loans (unlike banks that sold mortgages to Fannie/Freddy with a put back option before the great recession). Is this basically right or do I need a I need a lesson in securitization 101?

[PhilGD]

Really at a loss to understand what's going on here. Securitization of LC loans has been done before; just by Wall Street investment houses and not LC; correct? So now LC will be doing same and cutting out the middle man so to speak. LC has to come up with the money up front to buy the loans; then sells chunks of loan tranches to large investors. Once sold LC has no skin in the game; they just service the loans (unlike banks that sold mortgages to Fannie/Freddy with a put back option before the great recession). Is this basically right or do I need a I need a lesson in securitization 101?

I think they way it works is, LC will find an investment bank to help them put the deal together. In this case I believe it's Goldman Sachs and/or Jeffries. The IB will buy the loans from LC at some small discount to par value and then warehouse the loans until the deal is closed. The IB will work with LC to structure the deal and suggest initial pricing on the tranches, and then sell the tranches to investors. Potentially, LC could retain skin in the game through holding the residual piece in the deal or by holding on to an equity share in the trust so that they'd have exposure to any excess spread.

In prior securitizations of LC loans LC would not have been directly involved in the structuring/pricing aspect and no opportunity to retain skin in the game.

I'm not positive so hopefully someone can correct me if I'm wrong on this.

[Fred93]

I'm not positive so hopefully someone can correct me if I'm wrong on this.

Just no way to know until the details are released.  There are many ways each aspect could be handled. 

It would be trivial to borrow short term money from a big investment bank to fund a deal.  The borrowing would be backed by the loans, so would be low cost money.  Could also be a partnership with a big bank who assembles and funds the deal, as you suggested.  Could have skin in the game or not. 

One advantage to LC doing securitization rather than a bank is that then LC gets to keep the profit that would have gone to the bank.  This business has been all about bank disintermediation, right?  So why give banks a piece of the profit now?

There was a panel at lendit on securitization.  All the panel members stressed how important it is for an originator to make everything look the way wall street is used to seeing it.  Was funny.  This just indicates the low level of intelligence among these institutional investors.  If it has a CUSIP and I get a quote on bloomberg and it has a rating and it looks similar to other kinds of securitizations then I buy it.  You and I didn't work that way!  We learned about this new kind of asset, and learned how to choose what loans to invest in.  I'm expecting that these new securitizations are all going to be broad index products, similar to what was done with mortgages in the past.  I hope LC figures out how to earn a big markup from these guys.

[Rob L]

Thanks for helping me understand.

[Fred93]

Some info, but not completely clear whether this is the same project RL has spoken about
Dated 4/29/16 ...
http://www.bloomberg.com/news/articles/2016-04-29/goldman-jefferies-said-to-start-marketing-lendingclub-abs-deals

Jefferies Group is planning to bundle at least $150 million of consumer loans from LendingClub Corp. into bonds and sell them to investors in May, in the first of a series of such deals, people with knowledge of the matter said.

Goldman Sachs Group Inc. is planning to also buy loans from LendingClub and package them into bonds, one of the people said. LendingClub, which makes loans to consumers over the Internet, aims for deals like these to help cut funding costs.

The Jefferies transaction in May will be backed by riskier consumer loans with an average interest rate of 28.5 percent, one of the people said, while Goldman Sachs’s will be tied to debt at the lower end of the "prime" scale.

For the May sale, loans will be deposited into a special-purpose vehicle called LendingClub Investment Trust that will issue asset-backed securities with short maturities and credit ratings as high as A- from Kroll Bond Rating Agency, one of the people said.

GS and Jefferies are classy names to have as partners.

[P2PFact]

Some info, but not completely clear whether this is the same project RL has spoken about
Dated 4/29/16 ...
http://www.bloomberg.com/news/articles/2016-04-29/goldman-jefferies-said-to-start-marketing-lendingclub-abs-deals

Jefferies Group is planning to bundle at least $150 million of consumer loans from LendingClub Corp. into bonds and sell them to investors in May, in the first of a series of such deals, people with knowledge of the matter said.

Goldman Sachs Group Inc. is planning to also buy loans from LendingClub and package them into bonds, one of the people said. LendingClub, which makes loans to consumers over the Internet, aims for deals like these to help cut funding costs.

The Jefferies transaction in May will be backed by riskier consumer loans with an average interest rate of 28.5 percent, one of the people said, while Goldman Sachs’s will be tied to debt at the lower end of the "prime" scale.

For the May sale, loans will be deposited into a special-purpose vehicle called LendingClub Investment Trust that will issue asset-backed securities with short maturities and credit ratings as high as A- from Kroll Bond Rating Agency, one of the people said.

GS and Jefferies are classy names to have as partners.

I suppose these loans will be coming from whole loan program and thus take precedence over retail investors. Hopefully they don't pick all the good ones and leave us what's remaining...

[Rob L]

GS and Jefferies are classy names to have as partners.

Wonder what ever happened to the story that GS is planning to go into the marketplace lending business themselves?