Author Topic: Lending Club Loan Demand  (Read 12264 times)

AnilG

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Re: Lending Club Loan Demand
« Reply #15 on: June 11, 2016, 02:15:49 AM »
424(b)(3) Prospectus filing listing the loans for which Member Payment Dependent Notes were issued. Just search EDGAR for LendingClub 424B3 filings

I don't understand the article.
Quote
But late Wednesday in a regulatory filing, LendingClub revised lower the listing of loans sold to investors, which it attributed to a mistake. It revealed that the previously stated jump to $65 million in the last week of May from $22 million the week before was actually a drop to $21 million.

What "regulatory filing" are they talking about?  How do I find it online?  Is this an SEC filing, or something else?  I don't know of any filings that tell about weekly "loans sold to investors".  (Loans are sold to banks, but notes are sold to most investors.)  Perhaps they mean "loans offered to investors thru notes and certificates"?  The SEC form 424 do  that daily.  They are just lists of loans.  Is somebody adding up those numbers?  Or are they talking about something that is filed with someone other than the SEC?
« Last Edit: June 11, 2016, 02:18:05 AM by AnilG »
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Fred93

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Re: Lending Club Loan Demand
« Reply #16 on: June 11, 2016, 02:21:32 AM »
424(b)(3) Prospectus filing listing the loans for which Member Payment Dependent Notes were issued. Just search EDGAR for LendingClub 424B3 filings

Of course I see the 424's.  You don't have to search!  You can't miss them.   :D

Is there one which restates something?  Which one?

nonattender

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Re: Lending Club Loan Demand
« Reply #17 on: June 11, 2016, 03:03:55 PM »
Did this get posted? LC is already using their cash for loans.
http://www.wsj.com/articles/new-lendingclub-mistake-shows-loan-demand-issues-persist-1465565247
The new filing showed that LendingClub had bought $7.2 million worth of the notes itself in the period that was revised in May, the first time that LendingClub has held on to loans rather than immediately selling them to investors.
B
Nonsense.  Doesn't mean what you and the author of that article think it means.

LC did $2.5 Billion in loan originations last quarter.  $7.2 Million is so tiny relative to the origination rate that it simply could not be a new program to buy loans with the intention of changing the model, or increasing loan origination.  Not a policy change.  It isn't enough.  It is more like a rounding error. 

Therefore, it is some odds-and-ends, probably some stuff they had to buy back for some reason.

Means nothing.  Bad journalism.

No, it's a policy change for a new program of self-funding the loans...  It sounds like they built a routine to code loans that they're buying themselves and when that output went through the automated compliance filing system, it pooped out the LC-bought loans/notes (now there's a question!) with the fractional, retail-bought loan notes and reported both to/in the SEC filings for fractional notes...  This had the unfortunate outcome of causing some analyst at Morgan Stanley (who's been pumping since $30/share) to do an upbeat research note figuring that the bonus ~1% inducements were really, really, really working super-well and had trebled retail funding overnight... (which turned out not to be the case, retail funding actually fell by ~5%)...  (Tangent:  If they want to see an uptick, put in a BRV.)

So, absolutely not "bad journalism" - WSJ (especially Telis Demos and Peter Rudegeair) have been spot on in their LC reporting, lately, really impressive stuff - like "maybe I should buy a subscription again" impressive... I mean, I probably won't, but I'll feel very slightly guilty. ;)
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sommers

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Re: Lending Club Loan Demand
« Reply #18 on: June 11, 2016, 03:17:00 PM »
Did this get posted? LC is already using their cash for loans.
http://www.wsj.com/articles/new-lendingclub-mistake-shows-loan-demand-issues-persist-1465565247
The new filing showed that LendingClub had bought $7.2 million worth of the notes itself in the period that was revised in May, the first time that LendingClub has held on to loans rather than immediately selling them to investors.
B
Nonsense.  Doesn't mean what you and the author of that article think it means.

LC did $2.5 Billion in loan originations last quarter.  $7.2 Million is so tiny relative to the origination rate that it simply could not be a new program to buy loans with the intention of changing the model, or increasing loan origination.  Not a policy change.  It isn't enough.  It is more like a rounding error. 

Therefore, it is some odds-and-ends, probably some stuff they had to buy back for some reason.

Means nothing.  Bad journalism.

Do you work for L C?  This is BAD---this controverts their business model--it is fraught with conflicts of interest--it puts "them" in competition with "us"--and the real bad news it that "they" make the rules.  This just further highlights how truly fragile this entire business is.  And it's another "oops" moment  (sorry--we mis reported AGAIN!)
Wonder how much other unreported "stuff" there is?

nonattender

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Re: Lending Club Loan Demand
« Reply #19 on: June 11, 2016, 03:38:55 PM »
Did this get posted? LC is already using their cash for loans.
http://www.wsj.com/articles/new-lendingclub-mistake-shows-loan-demand-issues-persist-1465565247
The new filing showed that LendingClub had bought $7.2 million worth of the notes itself in the period that was revised in May, the first time that LendingClub has held on to loans rather than immediately selling them to investors.
B
Nonsense.  Doesn't mean what you and the author of that article think it means.

LC did $2.5 Billion in loan originations last quarter.  $7.2 Million is so tiny relative to the origination rate that it simply could not be a new program to buy loans with the intention of changing the model, or increasing loan origination.  Not a policy change.  It isn't enough.  It is more like a rounding error. 

Therefore, it is some odds-and-ends, probably some stuff they had to buy back for some reason.

Means nothing.  Bad journalism.

Do you work for L C?  This is BAD---this controverts their business model--it is fraught with conflicts of interest--it puts "them" in competition with "us"--and the real bad news it that "they" make the rules.  This just further highlights how truly fragile this entire business is.  And it's another "oops" moment  (sorry--we mis reported AGAIN!)
Wonder how much other unreported "stuff" there is?

Fred93 does not work for LC...  he's been around this industry almost as long as I have, probably since ~2006.  I do suspect he's holding a bunch of notes - which colors his perceptions a tad - and, of course, I also suspect he's an engineer of some sort, which completely colors his perceptions... :)

But, lighten up on the "you're a shill" stuff.  Your points about conflicts&moral hazards, when it comes to LC, though, are right on.  I probably haven't even thought of all the ways that investors are subject to abuse in "marketplace" models, much less in "hybrid" models... but the only thing for which Fred93 might be shilling is the continued health regarding his LC notes, which, unfortunately, due to the lack of a BRV and those notes being on LC's balance sheet, he's incentivized to do, as is anyone who holds a portfolio of notes with no "real" counterparty diversification, as the counterparty for each and every one of them is not a borrower - but LC.  (Requisite Tangent:  A BRV solves this issue - and many more!)

Other than that, he's a fine fellow and has contributed a ton of analysis, data, and insight over the years - and doesn't need me to defend him (and probably hates the very thought of it - which I will admit factoring into my defense!) from ad hominem attacks... :)
« Last Edit: June 11, 2016, 03:42:46 PM by nonattender »
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lascott

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Re: Lending Club Loan Demand
« Reply #20 on: June 11, 2016, 03:49:00 PM »
<snip> Other than that, he's a fine fellow and has contributed a ton of analysis, data, and insight over the years - and doesn't need me to defend him (and probably hates the very thought of it - which I will admit factoring into my defense!) from ad hominem attacks... :)
That was a hilarious comment. (Disclosure I'm a Fred93 fan but then again I hold a lot of notes and I am/was a software engineer!)

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

sommers

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Re: Lending Club Loan Demand
« Reply #21 on: June 11, 2016, 05:25:05 PM »
Did this get posted? LC is already using their cash for loans.
http://www.wsj.com/articles/new-lendingclub-mistake-shows-loan-demand-issues-persist-1465565247
The new filing showed that LendingClub had bought $7.2 million worth of the notes itself in the period that was revised in May, the first time that LendingClub has held on to loans rather than immediately selling them to investors.
B
Nonsense.  Doesn't mean what you and the author of that article think it means.

LC did $2.5 Billion in loan originations last quarter.  $7.2 Million is so tiny relative to the origination rate that it simply could not be a new program to buy loans with the intention of changing the model, or increasing loan origination.  Not a policy change.  It isn't enough.  It is more like a rounding error. 

Therefore, it is some odds-and-ends, probably some stuff they had to buy back for some reason.

Means nothing.  Bad journalism.

Do you work for L C?  This is BAD---this controverts their business model--it is fraught with conflicts of interest--it puts "them" in competition with "us"--and the real bad news it that "they" make the rules.  This just further highlights how truly fragile this entire business is.  And it's another "oops" moment  (sorry--we mis reported AGAIN!)
Wonder how much other unreported "stuff" there is?

Fred93 does not work for LC...  he's been around this industry almost as long as I have, probably since ~2006.  I do suspect he's holding a bunch of notes - which colors his perceptions a tad - and, of course, I also suspect he's an engineer of some sort, which completely colors his perceptions... :)

But, lighten up on the "you're a shill" stuff.  Your points about conflicts&moral hazards, when it comes to LC, though, are right on.  I probably haven't even thought of all the ways that investors are subject to abuse in "marketplace" models, much less in "hybrid" models... but the only thing for which Fred93 might be shilling is the continued health regarding his LC notes, which, unfortunately, due to the lack of a BRV and those notes being on LC's balance sheet, he's incentivized to do, as is anyone who holds a portfolio of notes with no "real" counterparty diversification, as the counterparty for each and every one of them is not a borrower - but LC.  (Requisite Tangent:  A BRV solves this issue - and many more!)

Other than that, he's a fine fellow and has contributed a ton of analysis, data, and insight over the years - and doesn't need me to defend him (and probably hates the very thought of it - which I will admit factoring into my defense!) from ad hominem attacks... :)

Duly noted---(re Fred)
This concept started out as a very "cool" business--filling a void (left by the traditional banks)---a 21st century solution to lack of credit due to the "crisis"--with an opportunity for the small guys (us) to make some money and help out some deserving borrowers who had been unjustly (in many cases) frozen out.
BUT--in the quest for growth it looks like it's been perverted.  This company looks desperate to me---I'm bailing out

Fred93

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Re: Lending Club Loan Demand
« Reply #22 on: June 12, 2016, 04:34:09 AM »
No, it's a policy change for a new program of self-funding the loans...

Just saying "no it isn't" doesn't exactly make a convincing argument.  Do you have a reason for believing this, other than your present anti-LC bias?

I don't see a reason to adopt your interpretation. 

Quote
This had the unfortunate outcome of causing some analyst at Morgan Stanley (who's been pumping since $30/share) to do an upbeat research note

I saw that reference in one article.  Other articles seem to reference a report from the company Craig-Hallum, which I have to admit I had never heard of before this. 

I don't think you can draw conclusions from a few weekly numbers in any case.  These "analysts" must be newcomers.  I've been watching these numbers for a long time, and they jerk around.  LC will go along setting out 100 or so loans per feeding time for several days, and then will suddenly dump 5000 at one feeding.  Very lumpy. 
« Last Edit: June 12, 2016, 04:47:14 AM by Fred93 »

Fred93

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Re: Lending Club Loan Demand
« Reply #23 on: June 12, 2016, 05:19:05 AM »
Do you work for L C?

Nope.

Quote
This is BAD---this controverts their business model--it is fraught with conflicts of interest--it puts "them" in competition with "us"

Somebody gives you one little number, and you extrapolate a story that LC is competing with you.  There are many other explanations.  LC put words in the last 10Q explaining some conditions under which LC buys notes.  None of them are to compete with you.  Frankly, they don't have enough money to compete with you, so it wouldn't make any sense.

Quote
And it's another "oops" moment  (sorry--we mis reported AGAIN!)

Excuse me, but there wasn't anything "mis reported" before, so this would appear to be the first time.

Back to that little number... The articles said LC corrected some number in a "regulatory filing".  I've been trying to figure out what "regulatory filing" the articles are talking about.  I would like to see for myself what the heck these guys are talking about.  So far, nobody can point me to the filing that was revised.  One fellow said he thought it was in the 424's.  There are a couple of difficulties I have with that notion.  First, on the SEC's web site I don't see one of those that has been amended.  Second, these aren't reports of loans that have been originated.  They are reports about loans that have been listed on the web site, for investors to invest in.  These forms are the SEC's way of ensuring that LC permanently documents the credit information for the loan which you (may have) used to make your investment decision. 

Each 424 says "The following standard program member loan is currently available for investing in through Notes. At the time the loan is issued by the issuing bank, the aggregate value of issued Notes may not equal the principal balance of the loan."

Given this statement, I don't see how one can add up the values of these loans and think that number = loan originations.

I don't disagree that somebody at LC made a mistake.  That's believable.  I just want to see the correction for myself, because I don't trust these article-writers to understand what the heck they're writing about. 

And from what we know so far about this mistake, I don't see evidence for the bad interpretation that you have chosen.

The sequence of screwups is not a most excellent situation, but I don't think you should let it frighten you so.

You used the word "fragile".  Yep.  What we are seeing first hand is that the most fragile thing is investor confidence.

rawraw

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Lending Club Loan Demand
« Reply #24 on: June 12, 2016, 06:44:45 AM »
I was struck by the existence of a regulatory filing that indicated volume, since I wasn't aware of one. On this issue, I trusted WSJ since they've been very good on this so far IMO. And when I pull up LC on Factset, there are far too many filings for me to dig through.

A phrase I always loved is there are no mistakes in SEC filings. This quote is around disclosures in 10Ks and 10Qs. LC disclosed they may invest in their own loans last filing. Then we see them doing just that.

You'll have to forgive me evaluating the possibilities, but this is how it seems to end up. Either LC is doing this temporarily due to having to fund some of those direct mailings (I still haven't found any support this is the case), they originate loans and are able to sell them at a later date, or management continues to fund notes in anticipation of an increase in investor demand that doesn't come.

This last option can be worrisome, as management is going to be under stress and this solution may seem attractive.  I have trouble accessing the probabilities of these events given the untested nature of the funding base coupled with the correlation between investor demand and counterparty risk. 

And it's unfair to call retail fragile. Institutions are just as fickle. All these issues seem to stem from   the result of capital markets freezing in 1Q16.  While I was following this trend during the quarter, I wish I would have made the connection of LCs impact. May have been a good trade.

Needless to say, I suspect this will be a topic of interest on the call if no other incidents occur.

Seems there are more distressed selling on Folio again.

Sent from my SAMSUNG-SM-G935A using Tapatalk
« Last Edit: June 12, 2016, 06:47:53 AM by rawraw »

nonattender

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Re: Lending Club Loan Demand
« Reply #25 on: June 12, 2016, 02:35:45 PM »
Quote
This had the unfortunate outcome of causing some analyst at Morgan Stanley (who's been pumping since $30/share) to do an upbeat research note

I saw that reference in one article.  Other articles seem to reference a report from the company Craig-Hallum, which I have to admit I had never heard of before this.

I read the MS note the day it came out.  It was definitely MS (or I have Alzheimers).  I looked at the note kinda sideways, screwed up my face, and filed it away in my brain's "dubious bullshit trashcan".  I have not looked for it since, maybe it has been disappeared in the meantime...  Point was, the MS analyst (and they all do this) followed the 424's as a proxy/heuristic/justanotherdatapointnicetohave for loan funding... he saw what he thought was a big spike in retail funding and got excited.  Turns out it was due to an LC reporting error (or call it whatever you like, a "what-we-report-via-this-means change" - they started including loans that they'd funded, or at least accidentaly did so, once - etc).  (He also probably forgot to factor, cynically, that just because a loan is "listed" doesn't mean it's necessarily going to fund, anymore - even though that's the way it's worked since at least IPO...)

Either way, before you go beating up on new guys who find it distasteful that LC would participate in either the primary or the secondary market, perhaps you should spend a moment reading this:  https://en.wikipedia.org/wiki/Principal%E2%80%93agent_problem

I hate to be the internet guy who posts wikipedia links to "back up" his points or as "further reading, before further conversation", but... there are certainly a lot of points that can be made when one looks at a "hybrid" model through the lense of principal/agent.
« Last Edit: June 12, 2016, 02:55:18 PM by nonattender »
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AnilG

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Re: Lending Club Loan Demand
« Reply #26 on: June 12, 2016, 03:43:25 PM »
I published a blog post about three years ago detailing the Lending Club buying their own loans. Previously LC partially funded loans from their own balance sheet when lenders on platform didn't commit full amount. Originally, this was to show the viability of p2p lending. Personally, I don't mind Lending Club filling the funding short-fall gap from its Balance Sheet on temporary basis as long as the loans were partially funded first by the lenders on its platform (no whole loan purchase).

Is Lending Club still self-funding loans?
https://www.peercube.com/blog/post/is-lending-club-still-self-funding-loans
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Fred93

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Re: Lending Club Loan Demand
« Reply #27 on: June 12, 2016, 04:27:23 PM »
I read the MS note the day it came out.  It was definitely MS (or I have Alzheimers).  I looked at the note kinda sideways, screwed up my face, and filed it away in my brain's "dubious bullshit trashcan".

Probably the correct reaction.  Wall Street used to publish analysis from people who actually knew something about what they were talking about.  Now the quality is really low.  sdI've stopped reading the stuff.

Quote
https://en.wikipedia.org/wiki/Principal%E2%80%93agent_problem

I get it.  I just haven't been as quick as some of you to jump on the accuse-them-of-everything bandwagon.  You may recall from another thread around here somewhere I liked the idea of refunding fees on loans that charge off, if the accounting rules issues can be resolved.  This would help align LC and us (good loans are better for both of us), while not investing their capital in loans.


nonattender

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Re: Lending Club Loan Demand
« Reply #28 on: June 12, 2016, 05:15:57 PM »
Quote
https://en.wikipedia.org/wiki/Principal%E2%80%93agent_problem

I get it.  I just haven't been as quick as some of you to jump on the accuse-them-of-everything bandwagon.  You may recall from another thread around here somewhere I liked the idea of refunding fees on loans that charge off, if the accounting rules issues can be resolved.  This would help align LC and us (good loans are better for both of us), while not investing their capital in loans.

Yeah, I could prattle on for hours, too, about neat ways to redesign market mechanisms and incentives to re-align interests (beyond just the surface suggestion that a lot of people reflexively make of "skin in the game!", which I don't think works out like they all hope it would), but, from an "industry" perspective, none of that matters (or can even be close-to-objectively discussed) until there's a BRV-like vehicle which insulates retail notebuyers/noteholders from having to try to put a price on the uncertainty that comes along with notes living on LC's balance sheet and therefore subject to either well-intentioned or mal-intentioned and long-term or short-term "uh-oh" scenarios...

BRV would be like a valium the size of a golf ball for LC's retail investors (and everyone else in the industry exposed to LC's "uh-ohs")...

Anil keeps saying it's "not a priority" - and the math is with him, on that - but it IS the single largest principal/agent conflict they've got, so, I think that makes it a priority and I think it gets us over this hump of having to care so much about LC's inside baseball and drama, and trying to crystal-ball gaze.

It'd be nice for everyone to be able to go back to just being worried about underwriting, borrowers screwing us, and a "fair" allocation.

Those were the days...
« Last Edit: June 12, 2016, 05:17:39 PM by nonattender »
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Fred93

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Re: Lending Club Loan Demand
« Reply #29 on: June 12, 2016, 06:10:24 PM »
BRV would be like a valium the size of a golf ball for LC's retail investors (and everyone else in the industry exposed to LC's "uh-ohs")...

Certainly for the most of the investors on this board.  However, I suspect that most investors have no clue what a BRV is.  I certainly didn't until I got involved in this stuff.  Therefore I'm not so sure that it would have the impact you presume.  Not trying to argue whether they should do it. 

For all we know, they are working on it.  They don't tell us anything these days, so we would never know.  If I were inside making the decisions I would think the biggest concern would be the stupid press.  At this point, if they introduced a BRV, the press would write articles concluding that they were preparing for bankruptcy.

The thing that pisses me off is the lack of communication.  I wrote an email about that to LC a couple of days ago, and my contact said he forwarded it to Sanborn.  I'm sure he's getting plenty of unwanted advice these days, and there's no particular reason he should consider mine.  I explained how bad the annual meeting postponement looks to investors, and that even if they were postponing the official meeting for reasons they didn't want to discuss (activist shareholder, etc) they could still host monthly or weekly status/Q&A conference calls to get communication going and build trust.  Told him that due to decreased volume of business, he needs a layoff, and the longer he postpones that, the more investors will conclude that he is stuck in the fantasy that things will go back to the way they used to be.