Author Topic: LC prepayments rising  (Read 12649 times)

Fred93

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Re: LC prepayments rising
« Reply #15 on: November 16, 2016, 08:31:31 AM »
What if borrowers realized they could lower their  monthly  payment dramatically by going for a 5 year loan instead of a 3 year loan?

Someone showed a chart of 3 year loan prepayments...what does the chart of 5 year prepayments look like?

I just checked the data.  The numbers for 60 month loan prepayments (for the first few months) are almost identical.  I'm not gonna bother to plot them, because the curves will sit right on top of the 36 month curves.

Fred93

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Re: LC prepayments rising
« Reply #16 on: November 16, 2016, 03:29:56 PM »
Got a partial answer from LC.  They say
Quote
Prior to 2014, our system was not set up to report payments in Month 0, hence no reporting of prepayments during that time frame.

My contact still looking for an answer to characterize how month0 prepays seem to be increasing after that.

rawraw

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Re: LC prepayments rising
« Reply #17 on: November 16, 2016, 06:43:00 PM »
Got a partial answer from LC.  They say
Quote
Prior to 2014, our system was not set up to report payments in Month 0, hence no reporting of prepayments during that time frame.

My contact still looking for an answer to characterize how month0 prepays seem to be increasing after that.
Very interesting! I was wondering if it was a quirk in the data

Fred

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Re: LC prepayments rising
« Reply #18 on: November 17, 2016, 12:50:47 AM »
Very interesting! I was wondering if it was a quirk in the data

No quirk in the data.

If I have to guess, the LC "risk officers" were probably (unconsciously) bringing their prepayment mindset from the mortgage world (PSA Model), where it is assumed that prepayment at month 0 is 0 -- https://en.wikipedia.org/wiki/PSA_prepayment_model.

nonattender

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Re: LC prepayments rising
« Reply #19 on: November 17, 2016, 04:05:35 AM »
I could swear we discussed this - and that I wrote about this phenom extensively - last month...  DFS/STI/GS all now "actively poaching"...
A little nonsense now and then is relished by the wisest men.

SLCPaladin

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Re: LC prepayments rising
« Reply #20 on: November 17, 2016, 01:51:54 PM »
I wonder if something else might be going on as well, like some people who go out looking for a 3 or 5 year loan are really just looking for a bridge loan. They may have assets that are tied up or just have some cash flow issues and need extremely short-term financing. Even though a 5% origination fee is steep, maybe it's the only option, or maybe other options are simply more painful from a financial standpoint.

I also agree with Anabio about the monthly payment vs. interest rate. In my experience, people are much more concerned about the amount they pay each month as opposed to the total amount they pay or the interest rate.

So maybe a quick refinance with a competitor that results in a lower monthly payment, even if it is more costly overall, might tip the scales in favor of a month 0 repayment and refi with an LC competitor.

RT45

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Re: LC prepayments rising
« Reply #21 on: November 18, 2016, 07:36:35 PM »
Good read on prepayments and fraud from WSJ.

http://www.wsj.com/articles/borrower-or-fraudster-online-lenders-scramble-to-tell-the-difference-1477580637

Pro Tip: If you don't have a paid subscription, Google the headline and click through from Google and it will unlock the paywall.

Fred93

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Re: LC prepayments rising
« Reply #22 on: November 20, 2016, 02:12:15 AM »
I think the WSJ article is a bad article.  It is just an echo of some recent Transunion propaganda piece intended to push a new Transunion service.

It talks about stacking, and gives some statistics on how stacking has increased, but note that the article fails to make a connection between stacking and loan quality, fails to make a connection between stacking and delinquency, fails to make a connection between stacking and fraud.  Fails to make a connection between stacking and anything actually.

Lots of insinuation, but no data.

The only "news" in the article is that TU is pitching some new service.

Fred93

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Re: LC prepayments rising
« Reply #23 on: December 01, 2016, 07:17:12 AM »
Update.  LC has published the November prepayments file, so I updated my chart.  This gives us the first prepayment numbers for vintage 2016Q3.  Bottom line is that month 0 prepayments continue to increase.



Notes:
1. After I gave a copy of the prior version of this chart to LC, and asked for an explanation of the increase in month 0 prepayments, I got two responses.  The first was that prior to 2014, their software was not set up to record payoffs in month 0.  This historical quirk explains the long string of zeros in the old month 0 data.  Their second comment was that the events of May 2016 caused a slowdown in lender activity, so in the days following that event, there were loans where the borrower was approved, but not funded quickly.  As a result, a significant number of borrowers found money elsewhere, then cancelled the LC loan, and that these were recorded as payoffs in month 0.  The timing of these events was not made explicit.  For example, I don't know if the borrower actually got the money and told LC to take it back, or if the loan was cancelled before the money transferred to the borrower.  I didn't inquire further.  I noted that could explain some of the jump in 2016Q2, but not Q1 or Q3, nor the obvious trend.  I don't believe the right people at LC took this inquiry seriously.  The overall question of why this is happening remains unanswered.

2. After my conversation with LC I realized that there were hints there that I (we?) don't understand the precise definition of a prepayment in month 0.  Perhaps that can be discussed further at some later time.

3. Careful observers may note that these curves don't look exactly like the curves I plotted from the Oct 2016 prepayment file.  Every data point has moved slightly.  This indicates a bug in LC's software.  There is no other explanation.  The prepayments during month 1 of loans issued in 2014, 2013, etc (for example) are a historical fact, and cannot change during 2016, so those old numbers should be constant from one prepayments file to the next, and yet, they have changed between the Oct2016 and Nov2016 prepayments files.  You can see, for example, that 2014Q4 now shows a dip which is not present in last month's chart.  I presume this bug is due to some quirk in the data which is not properly handled by LC's software.  I'm just making a visual representation of the data LC has published.  The changes induced by this bug appear to be small from month to month, so its not a big deal unless perhaps it is a clue to some larger problem.
« Last Edit: December 01, 2016, 07:19:21 AM by Fred93 »

rawraw

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Re: LC prepayments rising
« Reply #24 on: December 01, 2016, 04:52:52 PM »
Fred93 is the only person I've ever seen footnoting forum posts.  Hilarious and strangely effective at keeping TLDR reaction at bay

yielder

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Re: LC prepayments rising
« Reply #25 on: December 01, 2016, 05:33:59 PM »
Hello Everyone -

  Could month 0 prepayments be on the rise due to LC's securitization process?  The lender just buys your loan & moves it to their own portfolio? 

  Big lenders have a lot of clout & with the retail investors gone poof, LC needs lenders. 

  So they get special favors.  Like maybe taking out your loans.

  That would not be great news for investors, right?  Because the loans that are higher quality are taken out meanwhile we keep the lower quality ones.

Hmm...  What do you all think?

Rob L

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Re: LC prepayments rising
« Reply #26 on: December 01, 2016, 07:01:57 PM »
Fred93 is the only person I've ever seen footnoting forum posts.  Hilarious and strangely effective at keeping TLDR reaction at bay
Sorry for being slow on the uptake; what's a TLDR? Probably me LOL.  :)

rawraw

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Re: LC prepayments rising
« Reply #27 on: December 01, 2016, 07:04:03 PM »
Fred93 is the only person I've ever seen footnoting forum posts.  Hilarious and strangely effective at keeping TLDR reaction at bay
Sorry for being slow on the uptake; what's a TLDR? Probably me LOL.  :)
Internet slang meaning too long didn't read. Often written tl;Dr. People write it when the post is too long or posters will use it to indicate a summary of their long post

Tl;Dr  millennial slang

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we2ding

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Re: LC prepayments rising
« Reply #28 on: December 03, 2016, 11:01:08 AM »
I have had 3/108 repaid fully and I just joined in Oct.

SeanMCA

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Re: LC prepayments rising
« Reply #29 on: December 03, 2016, 02:29:12 PM »
I've had 928 notes pay off early and my account isn't even old enough to have had my first 3-year note reach maturity.
I'm a merchant cash advance veteran exploring the p2p lending waters.