Author Topic: LC prepayments rising  (Read 12619 times)

SeanMCA

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Re: LC prepayments rising
« Reply #30 on: February 19, 2017, 05:20:04 PM »
Are borrowers using a second loan from Lending Club to pay off their first Lending Club loan? The answer is yes


I'm a merchant cash advance veteran exploring the p2p lending waters.

SeanMCA

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Re: LC prepayments rising
« Reply #31 on: February 19, 2017, 05:25:22 PM »
These are just a sample of the reviews posted on Lending Club's own website.

Lending Club gives second loan to borrower. Borrower uses it to pay off their first loan. Lending Club charges 1% penalty to retail investors on outstanding principal for early prepayment even though the source of the prepayment funds came from Lending Club.

Lending Club gets another origination fee on the 2nd loan. If they dangle lower interest rates or a lower monthly payment, well then some borrowers are inevitably going to use the second loan to pay off the first one.

Question is, why should retail investors get hit with a penalty for this? At best retail investors become collateral damage.... at worst... well...
« Last Edit: February 19, 2017, 05:32:38 PM by SeanMCA »
I'm a merchant cash advance veteran exploring the p2p lending waters.

Rob L

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Re: LC prepayments rising
« Reply #32 on: February 19, 2017, 05:40:04 PM »
Smoking gun.

SeanMCA

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Re: LC prepayments rising
« Reply #33 on: February 19, 2017, 05:59:45 PM »
Does Lending Club know that some borrowers are using their second loan to pay off their first? The answer is Yes

How can they not tell the retail investor this but still charge them a fee for an "early prepayment" that they were the cause of?

I'm a merchant cash advance veteran exploring the p2p lending waters.

SeanMCA

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Re: LC prepayments rising
« Reply #34 on: February 19, 2017, 06:20:20 PM »
I mean these reviews are right on Lending Club's website...

I've attached 16 already that are pretty clear...
« Last Edit: February 19, 2017, 06:25:39 PM by SeanMCA »
I'm a merchant cash advance veteran exploring the p2p lending waters.

Fred93

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Re: LC prepayments rising
« Reply #35 on: February 19, 2017, 07:54:45 PM »
On the other hand...

In a period of falling interest rates, one has to expect refinancing. 

If LC doesn't do it, then somebody else will, eh?

I do get your basic point, which I believe is that LC's motivations and ours are not well aligned on this issue.

Rob L

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Re: LC prepayments rising
« Reply #36 on: February 20, 2017, 10:14:40 AM »
About a month ago I began investing in B grade only loans and created a new portfolio for them. Since that time I've purchased 259 notes. They break down as follows:

In Funding              1
In Review               5
Issuing                  15
Issued                 231
Current                   5
Fully Paid              2

So, no payments have yet come due for any of the first 4 categories (252) of the 259 loans yet I've already had two paid off early and in full.
One was issued on 1/31/2017 and fully paid only 8 days later on 2/7/2016 (loan id 97202338).
The other was issued on 1/26/2017 and fully paid only 26 days later on 2/17 (loan id 96737405).
Makes no sense!

newstreet

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Re: LC prepayments rising
« Reply #37 on: February 20, 2017, 10:56:13 AM »
I mean these reviews are right on Lending Club's website...

I've attached 16 already that are pretty clear...

As I said, this has been obvious.

1.  LC is scrambling for volume.
2.  Retail Investors shouldn't invest if they don't like the fees.
3.  The likelihood that large banks pay these fees is nil.
4.  LC has lost half their senior mgt team in the past year
5.  The auto loan product is ill conceived given the credit cycle
6.  The stock compensation for "executives" is approaching absurd levels
7.  The business lending initiative has failed
8.  The patient solution business have been cut 70% (they still need to writedown the goodwill associated with this acquistion by around 50%)

Crazy




Fred93

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Re: LC prepayments rising
« Reply #38 on: February 20, 2017, 05:45:26 PM »
About a month ago I began investing in B grade only loans and created a new portfolio for them.
...
Issued                 231
Fully Paid              2
...
Makes no sense!

It is however consistent with data the LC has published on prepayments.  LC publishes a spreadsheet of prepayment statistics broken down by vintage (and if you manipulate the pivot table, you can see it by grade as well).  It says that for recent vintages, about 1.4% of loans prepay in month 0.

1.4% of 231 = 3.2 which is similar to the 2 you see in your portfolio.   

I should say at this point that I have tried to figure out what it all means... and I have to say that it is unclear at this point.  If you look at past vintages where prepayments were a lot higher than normal in early months (back in 2009 for example) this did NOT result in a higher total cumulative prepayment.  In other words, people prepaid earlier than expected, but did not prepay overall more than in other vintages.  Given this history, I am shy about simply extrapolating the current vintage and concluding that total prepayments will be huge.

I've updated my prepayments chart.  This is data published by LC.  Chart by me.   I've updated with the Feb 2017 data file. 

Note: LC has explained that prior to 2014, their software did not categorize prepayments in month 0.  I don't know exactly what they did with them prior to 2014, but they didn't show up as prepayments in the big payments file, and therefore don't show up in this data.

apc3161

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Re: LC prepayments rising
« Reply #39 on: February 20, 2017, 06:27:53 PM »
I just asked LC in an email if they could tell me what percentage of pre-payed loans are due to LC's own refinancing. They couldn't/wouldn't provide this info:

"All the information we display public ally is located on our Statistics page and we currently do not have the data for how many of the pre paid loans are from refinancing. Thank you for your understanding."

newstreet

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Re: LC prepayments rising
« Reply #40 on: February 20, 2017, 07:21:36 PM »
I just asked LC in an email if they could tell me what percentage of pre-payed loans are due to LC's own refinancing. They couldn't/wouldn't provide this info:

"All the information we display public ally is located on our Statistics page and we currently do not have the data for how many of the pre paid loans are from refinancing. Thank you for your understanding."

Of course they have the data, but why would disclose it to the retail guy they are trying to screw.Bigger picture........place your bets on the percent of orignations in Q4 that were refis....I say 35%. 

Funny..... the CEO and CFO stated that they stopped using "Incentives" in Q4.  They were referring to incentives to Institutions. No mentions of "incentives"  that they flooded current borrowers with (ie. lower rates, longer terns)...tricks are for kids...lol

jheizer

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Re: LC prepayments rising
« Reply #41 on: February 21, 2017, 12:52:18 AM »
I've been poking around with this tonight and I wouldn't be surprised now if LC said that at least 5% of the loans are a second loan and/or refi.  The number of what I am assuming are matches is huge.  It could be way more as I've just roughly matching data that is exactly the same.  So if they got for example a $1k raise I'd miss them.  There are even a decent number of people I'd assume have had 3 loans, but only 2 active at a time on the few I looked at in more detail.

Spot checking a few, it seems a lost of them are falling behind and need a second, riskier, larger loan.  Some times they paid off the first one, some times they both went to charged off.  I didn't seem to come across too many where it seemed like they refied to a lower rate.  But I only looked at the details of 2 dozen or so cases so it could just be the luck of the draw.  I'd have to write some code to get a better idea.


Example of someone who has had 3 loans and slowly going down hill. 31216399   65007223   91594336  Vacations are important...
Replacement to P2P Quant's Percentile Tool http://lc.geekminute.com

jheizer

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Re: LC prepayments rising
« Reply #42 on: February 23, 2017, 11:52:39 PM »
I decided to look at this again tonight.

1,321,818 - Number of Loans in the historical files
8,341 - People I believe have taken out 2 or more loans.  I tightened up my matching from the above post as I think 5% was just too many.

The following are the number of people that have taken out at least 2 loans and the first one is in "Fully Paid" status and the second one:
1,512 - ... is ONE letter grade better or more.
1,286 - ... is ONE letter grade better or more and the second loan was started within 550 days of the first loan.
466 - ... is TWO letter grade better or more and the second loan was started within 550 days of the first loan.
And the ones that are probably the worst for us:
512- ... is ONE letter grade better or more and the second loan was started after 350 days and before 550 days of the first loan.

Things to note:
Grade difference in this case is defined as a change in a whole grade only looking at the letter and not the sub grade number.
I did not check the ending date of the first loan vs the starting date of the second one to check over overlaps.
This is all assuming the first 8,341 people I identified was correct.  I'm not sure if that is a reasonable number or not.


So my guess would be they are not offering up as many refinances as we first thought.  Or I am being too strict on matching people.

A bit of side information.  The status of the 16k loans that make up the duplicates:
Code: [Select]
Count Loan Status
848 Charged Off
8458 Current
16 Default
7 Does not meet the credit policy. Status:Charged Off
22 Does not meet the credit policy. Status:Fully Paid
7024 Fully Paid
111 In Grace Period
71 Issued
42 Late (16-30 days)
212 Late (31-120 days)

« Last Edit: February 23, 2017, 11:55:31 PM by jheizer »
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Fred93

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Re: LC prepayments rising
« Reply #43 on: February 24, 2017, 12:21:16 AM »
1,321,818 - Number of Loans in the historical files

1,286 ... number of people that have taken out at least 2 loans and the first one is in "Fully Paid" status and the second one ... is ONE letter grade better or more and the second loan was started within 550 days of the first loan.

So that's one out of a thousand, ie 0.1% ?  !!!

If that's anywhere close to right I would say it knocks down the refinancing conspiracy theorists pretty good.

Devil is in these categorizations.  In other words, not only do you need to get the matching algorithm right, but then you need to figure out what the heck to measure.  I'm sure some will argue with the one grade, or the 550 days, or ...

For example: The numbers above are for all time, but if refinancing is a more recent phenomena, perhaps we should limit both the numerator and denominator to loans issued in some recent time period, perhaps the last year?

Still it looks like your result is going to show that the refinancings are a small fraction of total.

Rob L

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Re: LC prepayments rising
« Reply #44 on: February 24, 2017, 09:13:30 AM »
I decided to look at this again tonight.

1,321,818 - Number of Loans in the historical files
8,341 - People I believe have taken out 2 or more loans.  I tightened up my matching from the above post as I think 5% was just too many.

The following are the number of people that have taken out at least 2 loans and the first one is in "Fully Paid" status and the second one:
1,512 - ... is ONE letter grade better or more.
1,286 - ... is ONE letter grade better or more and the second loan was started within 550 days of the first loan.
466 - ... is TWO letter grade better or more and the second loan was started within 550 days of the first loan.
And the ones that are probably the worst for us:
512- ... is ONE letter grade better or more and the second loan was started after 350 days and before 550 days of the first loan.

Things to note:
Grade difference in this case is defined as a change in a whole grade only looking at the letter and not the sub grade number.
I did not check the ending date of the first loan vs the starting date of the second one to check over overlaps.
This is all assuming the first 8,341 people I identified was correct.  I'm not sure if that is a reasonable number or not.


So my guess would be they are not offering up as many refinances as we first thought.  Or I am being too strict on matching people.

A bit of side information.  The status of the 16k loans that make up the duplicates:
Code: [Select]
Count Loan Status
848 Charged Off
8458 Current
16 Default
7 Does not meet the credit policy. Status:Charged Off
22 Does not meet the credit policy. Status:Fully Paid
7024 Fully Paid
111 In Grace Period
71 Issued
42 Late (16-30 days)
212 Late (31-120 days)

Very nice work. What a remarkably small number. Guess I must have had the unfortunate and astoundingly improbable coincidence of having half them in my portfolio alone.  :)