My Decaying Star .......

[SeattleSun]

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For totally personal reasons I have to unwind my 1200 active loan portfolio of mostly 3 year $100 dollar loans.

So far I have chosen to just let them run off.

At the end of this month (June 16) I will have about $10,000 to withdrawal.  More than I would have guessed.

I am trying to get an idea of what this decay will look like going forward.

Anyone done this before or can see the future. 

Is there a better way to do this?   Suggestions welcome   

I have a filo account but don't want to sell a significant portfolio at a discount, just stubborn.

TIA

Its a Prosper account but that shouldn't really matter in regards to this question.

[AnilG]

You receiving about $4,000 in monthly payments alone (~ 1,200 x $100 / 36 months +). Rest most probably is the prepayments if loans are relatively new. IMO, your monthlies might settle at about $3-6K with time.

[SeattleSun]

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Thanks AnilG, 

I pulled $9,000 out at the end of June. 

But the rate of cash build up has slowed down and is only $1,300 for the first 6 days of July.

[Half Right]

im all in 36 month notes and i think based upon the prior month it will take about 13 months to liquidate. Also waiting it out patiently

[anabio]

I originally purchased 1,426 notes at mostly $25 per note in A B C. Started buying in March 2014. Whole $30,000 fully invested within 3 months (by end of may 2014). Re-invested earnings from June 2014 to Jan 2015. In Jan of 2015 I started to see the writing on the wall. I can't say I did much number crunching (not that kind of guy anymore) but intuition seemed to indicate something was  not right with charge off rates. I also started worrying more about a recession coming (co-incidentally???) right after this Nov. election. (They can't use chewing gum and  baling wire forever). At that time my account was worth $31,900. Letting things pay off "normally" I now have $7,193 of my original $31,900 left. The majority of those remaining notes will pay off fully by May 2017.

I stopped buying notes and started taking money out in Jan 2015. Of the 1426 notes, I have:
737 left (current)
541 paid off early
7 in grace
6 late 16-30
8 late 31-120
2 default
115 charged off.

NOTE 1: You may not get as many paid off early as me because LC is in a rising interest rate period. I got quite a bit paid off early because four or so months after I purchased most of these notes LC went into a decreasing interest rate period so people refinanced. I'm still getting between 20-25 notes paying off early each month.

NOTE 2: As I said in a note on another topic I don't think you can count on defaults tapering off after the 1 year point. My (conservative) estimates show I will have just as many notes if not more default/charged off after the 12 month point as under the 12 month point.

[lascott]

So far I have chosen to just let them run off.

This is what 3 months looks like for me.

[SeattleSun]

You receiving about $4,000 in monthly payments alone (~ 1,200 x $100 / 36 months +). Rest most probably is the prepayments if loans are relatively new. IMO, your monthlies might settle at about $3-6K with time.

July, the 2nd month of unwinding, generated $7,800 cash. 

So $16,800 generated in two months and have 1133 loans left with a value of ~$81,000.

Given RobL nice post on his experience selling loans I may put this unwind on steroids and start trying to sell loans.

This is all done inside an taxable LLC and to avoid the nightmare of accurately computing a NAV I/we keep a constant capital structure until the end of year and use Prosper tax document to generate our k-1s

[Rob L]

July, the 2nd month of unwinding, generated $7,800 cash. 
So $16,800 generated in two months and have 1133 loans left with a value of ~$81,000.

Given RobL nice post on his experience selling loans I may put this unwind on steroids and start trying to sell loans.

Glad you found it helpful. I have zero experience with Prosper notes and Folio so what I've posted may or may not transfer well to Prosper. Hope it will.
Please keep us informed of your progress and good luck!

[Larry321]

I have changed my expectations for my LC investments from 9% to 7% to anything between 6-7%

At least we are still making money.

[Rob L]

I have changed my expectations for my LC investments from 9% to 7% to anything between 6-7%
At least we are still making money.

Yeah, I've always wanted basically (just?) 6% or better believe it or not. Where else are you going to get that?
LC sent me a survey a few months back and that's what I told them regarding my expectations.
BUT, 5/9 reminded me that risk and reward are always joined at the hip. I was reminded how much risk I was taking for that HUGE 6%.
No one expected or predicted 5/9. (I even lost $4k trading LC stock). A reminder to me that I am taking a big risk to get that 6%+; and so it should be. DUH?
There is a downside that I had underweighted before, but think I've taken appropriate steps to accommodate that risk.
Not so different than the stock market. No shame in selling half your position given current conditions as one sees them..
My standard investment is about 5% of my liquid net worth.
When I started with LC that's what I invested. With profits it grew to more than 8%; so the need to scale back; now down to 3.8%.

[RT45]

@SeattleSun - were you able to get access then to Folio as an LLC structure?

[SeattleSun]

@SeattleSun - were you able to get access then to Folio as an LLC structure?

Yea but I did it a few years back.  Traded a few notes just to "test" the system in case there was a fire and I had to exit Prosper in a hurry and have just let it sit idle the last few years.  Washington is a Prosper approved state so I just buy my loans the normal way.

Perhaps I should run another test to make sure it still if functional.

But recently got advise from a bank industry guy about a TDAmeritrade brokerage account I let set idle for years too.  He said that account was "golden" as it would be nearly impossible to set it today.

Is that what your hinting at?

SS

[andy3109]

I have changed my expectations for my LC investments from 9% to 7% to anything between 6-7%

I've mentioned it before, but I've been investing since 2009. On average, you will get 6-7% on a fully mature and diversified portfolio. Remember, LC is not very tax friendly...so earning 6-7% is not the same as selling a stock for long term capital gains (and filling taxes for LC is much more of a pain). Overall, earning the equiv. of 5-6% isn't worth it for me. I still have my Roth with LC, but I am winding down my personal account.

[Larry321]

And3109,

Perhaps my portofolio has reached maturity.  My adjusted net annual return has fallen from close to 9% to about 6.15%.
My adjusted account value has not increased in a month.

Perhaps it is time to allow my notes to mature and not reinvest.

I have changed my expectations for my LC investments from 9% to 7% to anything between 6-7%

I've mentioned it before, but I've been investing since 2009. On average, you will get 6-7% on a fully mature and diversified portfolio. Remember, LC is not very tax friendly...so earning 6-7% is not the same as selling a stock for long term capital gains (and filling taxes for LC is much more of a pain). Overall, earning the equiv. of 5-6% isn't worth it for me. I still have my Roth with LC, but I am winding down my personal account.

[SeattleSun]

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Just an update that probably no one really cares about but ....

but then again I think you can no longer sell Prosper loans thru Folio if I remember correctly? 

So decay maybe your only exit strategy??


My Decaying Star (Prosper account) spun off $38k in cash the last 6 1/2 months of 2016.  I pulled the cash balance at the end of December 2016

So far in the first 10 weeks of 2017 it has built up $13k of cash in the account.   It has decayed from $98k to $48k in about 9 months

This at the higher end, about $6k/mo, of what AnilG anticipated (See  AnilG's post on June 26, 2016)  I suspect I was the beneficiary of  a surge in prepayments.

The youngest loan in the account is from early June 2016 and there are 834 active loans.  Unfortunately I have a half dozen 5 year loans that will be the long tent pole in closing this account.