Author Topic: Aren't the sellers losing money by selling new loans at a discount?  (Read 4356 times)

Larry321

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I was browsing at loans for sale on the Folio pages.
There are more than a few notes for $150 being sold at a discount of around 2% with $0 paid and 60 payments left.

Doesn't that mean that mean the seller is selling at a loss?
There is one loan, for which the seller, presumeably invested $150 and is selling the loans of $148.98.
There are several other loans with the same sort of discount?
What is the seller's logic in doing that?
How does that benefit the seller?

Also, Folio has loans listed with a negative YTM.
I thought you could not list loans at a negative YTM?
Why would anyone want to buy a negative YTM loan?

Thanks in advance to anyone who answers and clarifies any of tose questions.
« Last Edit: July 06, 2016, 11:28:16 AM by Larry321 »
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Ran

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Aren't the sellers losing money by selling new loans at a discount?
« Reply #1 on: July 06, 2016, 11:37:21 AM »
Lendingclub raised rate for E-G 60m by ~1% early June. And the notes you see are those issued right before the rate raise. Generally for 60m amortization loans, 1% rate change needs 2-3% price decrease to get the same Yield To Maturity. So 2% or more discount is necessary. Actually the notes you see currently in Folio need to discount FURTHER to match the yield of new issue loans

Fred93

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Re: Aren't the sellers losing money by selling new loans at a discount?
« Reply #2 on: July 06, 2016, 01:38:27 PM »
There are more than a few notes for $150 being sold at a discount of around 2% with $0 paid and 60 payments left.

Doesn't that mean that mean the seller is selling at a loss?
...
What is the seller's logic in doing that?

Fear.  Panic.  Perhaps an immediate need for cash.

AnilG

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Re: Aren't the sellers losing money by selling new loans at a discount?
« Reply #3 on: July 06, 2016, 02:36:18 PM »
I found 19 similar notes listed on Folio. Some of them that I checked appeared to be from Credit Grades that had significant change in interest rate since these notes were issued.

For example, Loan ID 79753348 is a 60 month F2 loan with 25.44% Interest Rate (https://www.peercube.com/comment?loanid=79753348). The seller is selling note at 26.16% YTM and -2.36% markup. The new interest rate for F2 loans is 26.49%. The seller will come out ahead by selling the note than holding the note.

I was browsing at loans for sale on the Folio pages.
There are more than a few notes for $150 being sold at a discount of around 2% with $0 paid and 60 payments left.

Doesn't that mean that mean the seller is selling at a loss?
There is one loan, for which the seller, presumeably invested $150 and is selling the loans of $148.98.
There are several other loans with the same sort of discount?
What is the seller's logic in doing that?
How does that benefit the seller?
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PeerCube Thoughts blog https://www.peercube.com/blog
PeerCube https://www.peercube.com

dalebreton

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Re: Aren't the sellers losing money by selling new loans at a discount?
« Reply #4 on: April 29, 2020, 02:58:07 AM »
The answer to your question is not going to satisfy you.

annacox

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Re: Aren't the sellers losing money by selling new loans at a discount?
« Reply #5 on: June 27, 2020, 03:38:57 AM »
Lendingclub raised rate for E-G 60m by ~1% early June. And the notes you see are those issued right before the rate raise. Generally for 60m amortization loans, 1% rate change needs 2-3% price decrease to get the same Yield To Maturity. So 2% or more discount is necessary. Actually the notes you see currently in Folio need to discount FURTHER to match the yield of new issue loans
Thank you. Now I understand more.