LC's home page shows the collapse

[bcinvest2016]

Head on over to the home page today.

This used to say 99.8% Positive returns. That's fallen to 99%.

[smihaila]

No wonder - since my estimated returns have now gone from 9-10% down to 4.55% - about 180 notes, 5 defaults, only 3-year notes, mostly C4, C5, D and E.
LC does not seem to due its due diligence in chasing bad payers. I have stopped investing into new notes for the last 6 months or so.

[.Ryan.]

Head on over to the home page today.

This used to say 99.8% Positive returns. That's fallen to 99%.

Wow... that is down from when they claimed 99.9% positive returns when spread across 100+ notes. Obviously the term 'collapse' is a bit tongue-in-cheek, but I do find it interesting that LC is having to back away from some of their bold statements regarding returns that they have loved to tout.

It does concern me to see the downward trend when their isn't much macro factors to explain it (least not obvious to me). I'm hoping it is just a few bad apples in the bunch that the new controls that LC/P are implementing to will stop. But if that's not the case, I'm wondering if returns may dip even lower (negative?) with compounding factors in the future, such as a recession.

[apc3161]

It does concern me to see the downward trend when their isn't much macro factors to explain it (least not obvious to me).

That indeed is the frightening part. As of right now, there is not macro-economic explanation for these poor returns. My returns over the past few months have been ~0%. I still believe, after going public, there was incredible pressure to continue increasing their loan volumes aka their revenue exponentially, and so they lowered lending standards in an attempt to do so.

I think it's backfired of course, whereas they could of had slower but organic growth with confidence and consistency, instead they got a few quarters of incredible growth, but now everyone is backing away (myself included).

[Fred93]

See.. http://www.lendacademy.com/forum/index.php?topic=4113.msg38554#msg38554

In this chart you can see how the delinquencies are worse for last four quarters vintages than recent vintages compared at same age.  Delinquencies drive defaults, which drive returns down, as these vintages start to dominate most portfolios.

[fliphusker]

I do not think 101 is enough to diversify and even maybe 200.  Sure defaults are up, (had a perfectly good FOLIO with 13 payments left just go BK yesterday with a 720 unchanged FICO) but should not be up that much that people can actually get negative returns.  I would be curious to see if the number of investors who are below 0 sold out after LP day on FOLIO and took massive losses. 

99% of investors who invest in 100+ Notes of relatively equal size have seen positive returns.2

[smihaila]

I do not think 101 is enough to diversify and even maybe 200.  Sure defaults are up, (had a perfectly good FOLIO with 13 payments left just go BK yesterday with a 720 unchanged FICO) but should not be up that much that people can actually get negative returns.  I would be curious to see if the number of investors who are below 0 sold out after LP day on FOLIO and took massive losses. 

Now you are implying that we should all buy 5 million dollar worth of notes just to make the LC's statistical assumption work?? :-) 200 notes is pretty reasonable, wouldn't you think?

About using FolioN/secondary market, you know what? A paradox: I was getting better returns when giving course to my gut feeling of bad payers (in grace status etc) and liquidating them fast and even at a loss. Now lately, I decided that it was too much work to track them all and be ultra-passive and do nothing instead. And guess what - defaults started to pile up and overall return rate massively decreasing!

I was making this rule myself: didn't matter to me that a certain note/borrower was in a grace period only for a short period and then s/he got back with all the payments. On contrary, I was keeping track of those specifically, and made it a rule to sell them ASAP as soon as they recovered from "in grace" or "late 30 days" status. And that strategy never failed me - someone who is lazy or ignorant ONCE, will be again soon...

But now I've got sick of these games and time needed to be spent for this. Waiting for my existing notes to mature and ... Au revoir LC!

[rawraw]

I'm glad several of the investors on this forum are leaving. I've long felt people were getting into this with unrealistic expectations and naive beliefs. I expected a recession to weed them out. Seems this will help weed them out without  having to take large losses first.  To me that's a great thing. Hopefully they can invest in something more aligned with their risk tolerances and not just chase yield.

[dmcnic]

I'm glad several of the investors on this forum are leaving.

It seems to me there are not a lot of people leaving by selling their portfolio on folio. The quantity of loans for sale seems stable and the discount / markup ratio does not seem to be rising. I have found a lack of discounted loans over the past two weeks. It feels like people are not leaving by closing out, but instead by allowing the loans to roll off through maturity or default. That's a way of accepting risk that I wouldn't be able to tolerate. But that's me.

[fliphusker]

My portfolio is one of the smallest of the posters here, 290 notes, I know how my ANAR swings wildly during the month due to IGP or later notes.  No doubt some have left LC because of the swings with small accounts.  My FOLIO ANAR just came positive because of holding the same note twice, went BK after 1 payment. 
How many of the 1% did zero backtesting when they jumped in?
I am currently rolling with my IGP notes as almost all have settled into the trend of paying on the same late date monthly.  Am I dumb for this?  Time will tell.  Sure there are plenty who go IGP or later and default, but how many of those do not?  I see it time and time again with FOLIO notes that the borrower went IGP in the 1st month and never again, so far at least.  So you would not buy a 60-month note that went IGP during the first few months and made every payment with a stable FICO 2 years later?

I do not think 101 is enough to diversify and even maybe 200.  Sure defaults are up, (had a perfectly good FOLIO with 13 payments left just go BK yesterday with a 720 unchanged FICO) but should not be up that much that people can actually get negative returns.  I would be curious to see if the number of investors who are below 0 sold out after LP day on FOLIO and took massive losses. 

Now you are implying that we should all buy 5 million dollar worth of notes just to make the LC's statistical assumption work?? :-) 200 notes is pretty reasonable, wouldn't you think?

About using FolioN/secondary market, you know what? A paradox: I was getting better returns when giving course to my gut feeling of bad payers (in grace status etc) and liquidating them fast and even at a loss. Now lately, I decided that it was too much work to track them all and be ultra-passive and do nothing instead. And guess what - defaults started to pile up and overall return rate massively decreasing!

I was making this rule myself: didn't matter to me that a certain note/borrower was in a grace period only for a short period and then s/he got back with all the payments. On contrary, I was keeping track of those specifically, and made it a rule to sell them ASAP as soon as they recovered from "in grace" or "late 30 days" status. And that strategy never failed me - someone who is lazy or ignorant ONCE, will be again soon...

But now I've got sick of these games and time needed to be spent for this. Waiting for my existing notes to mature and ... Au revoir LC!

[jz451]

I'de more preferrably sell my notes once they go IGP, but I've gone back and forth in my head that it doesn't matter if a note goes IGP or note, because if I plan to sell it now for a 30% discount I'm getting my 70% back. Conversely if I let the 30% of notes that are to go bad, go into late status or default I'm still at 70%. It's all a matter of perspective. It's obviously easier for me to keep track of my notes since I only have like 90 notes, but I'de still prefer to sell my bad notes just to make me feel better inside, and move on from those notes.

My portfolio is one of the smallest of the posters here, 290 notes, I know how my ANAR swings wildly during the month due to IGP or later notes.  No doubt some have left LC because of the swings with small accounts.  My FOLIO ANAR just came positive because of holding the same note twice, went BK after 1 payment. 
How many of the 1% did zero backtesting when they jumped in?
I am currently rolling with my IGP notes as almost all have settled into the trend of paying on the same late date monthly.  Am I dumb for this?  Time will tell.  Sure there are plenty who go IGP or later and default, but how many of those do not?  I see it time and time again with FOLIO notes that the borrower went IGP in the 1st month and never again, so far at least.  So you would not buy a 60-month note that went IGP during the first few months and made every payment with a stable FICO 2 years later?

I do not think 101 is enough to diversify and even maybe 200.  Sure defaults are up, (had a perfectly good FOLIO with 13 payments left just go BK yesterday with a 720 unchanged FICO) but should not be up that much that people can actually get negative returns.  I would be curious to see if the number of investors who are below 0 sold out after LP day on FOLIO and took massive losses. 

Now you are implying that we should all buy 5 million dollar worth of notes just to make the LC's statistical assumption work?? :-) 200 notes is pretty reasonable, wouldn't you think?

About using FolioN/secondary market, you know what? A paradox: I was getting better returns when giving course to my gut feeling of bad payers (in grace status etc) and liquidating them fast and even at a loss. Now lately, I decided that it was too much work to track them all and be ultra-passive and do nothing instead. And guess what - defaults started to pile up and overall return rate massively decreasing!

I was making this rule myself: didn't matter to me that a certain note/borrower was in a grace period only for a short period and then s/he got back with all the payments. On contrary, I was keeping track of those specifically, and made it a rule to sell them ASAP as soon as they recovered from "in grace" or "late 30 days" status. And that strategy never failed me - someone who is lazy or ignorant ONCE, will be again soon...

But now I've got sick of these games and time needed to be spent for this. Waiting for my existing notes to mature and ... Au revoir LC!

[smihaila]

I'm glad several of the investors on this forum are leaving. I've long felt people were getting into this with unrealistic expectations and naive beliefs. I expected a recession to weed them out. Seems this will help weed them out without  having to take large losses first.  To me that's a great thing. Hopefully they can invest in something more aligned with their risk tolerances and not just chase yield.

Wow, what a patronizing and arrogant attitude. And you are...? LC representative maybe?
We've dived into this investment vehicle to get more than 3-4% for our money - especially when higher risk borrowers are involved, right? And the return now is not at all on par with the risk. So it's basically a rip-off now...