Author Topic: LC prepayments rising  (Read 11650 times)

jheizer

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Re: LC prepayments rising
« Reply #45 on: February 24, 2017, 09:18:03 AM »
Yup, pretty small odds, like you said if things were done right.  Last night I tightened up the person matching from I'm pretty sure they are the same to they absolutely have to be.  For it to be in error now you'd basically have to be working the same fixed rate (factory like job) in the same place with the same title and have the same starting credit date.  I decided I'd rather guess up from here than have a starting possibly inflated number.  So even if I am off by a factor of 10, that is still only 1% for your picked case.

The reason I included the grade jump was I assumed with the initial fees you'd have to get some kind of decent interest rate boost to make it worth it for a general refi scenario vs just taking out a bigger loan because you need more money now.  But that is assuming people understand the numbers...

550 was a random guess.  Close enough to crossing the 1 year mark that it would be annoying, but far enough out that after that we probably can't blame a LC marketing campaign.


I'll run any scenarios anyone wants.  It only takes me a few seconds to adjust the code and a few minutes for it to run.  I'm sitting here in front of a computer all day anyway.  Just let me know specifics.
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jheizer

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Re: LC prepayments rising
« Reply #46 on: February 24, 2017, 09:24:46 AM »

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.  :)

I could be very wrong.  I don't deny it.

Right now I am matching on homeOwnership, annualInc, addrZip, earliestCrLine, empTitle.

In the historical files earliestCrLine is a month so a pretty big range.  If I remove empTitle it jumps from 8341 to 61,658.  Being a free text field it is hard to do solid matching on.  Would people enter exactly the same thing twice?  Assuming the ratios from the previous post stay the same that would mean 11,098 people that is ONE letter grade better or more.  Why I kind of quoted the factor of 10 error rate.



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SeanMCA

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Re: LC prepayments rising
« Reply #47 on: February 24, 2017, 09:39:29 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.

.1%, no way. 5% is too low, not too high. On the small business lending side of online lending, the percentage of customers who take a 2nd loan from their lender is 50%+. For some companies it's around 80%.
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SeanMCA

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Re: LC prepayments rising
« Reply #48 on: February 24, 2017, 09:42:03 AM »
Yup, pretty small odds, like you said if things were done right.  Last night I tightened up the person matching from I'm pretty sure they are the same to they absolutely have to be.  For it to be in error now you'd basically have to be working the same fixed rate (factory like job) in the same place with the same title and have the same starting credit date.  I decided I'd rather guess up from here than have a starting possibly inflated number.  So even if I am off by a factor of 10, that is still only 1% for your picked case.

The reason I included the grade jump was I assumed with the initial fees you'd have to get some kind of decent interest rate boost to make it worth it for a general refi scenario vs just taking out a bigger loan because you need more money now.  But that is assuming people understand the numbers...

550 was a random guess.  Close enough to crossing the 1 year mark that it would be annoying, but far enough out that after that we probably can't blame a LC marketing campaign.


I'll run any scenarios anyone wants.  It only takes me a few seconds to adjust the code and a few minutes for it to run.  I'm sitting here in front of a computer all day anyway.  Just let me know specifics.

At a minimum, I would have to guess that at least 20% of Lending Club's borrowers are taking a 2nd loan. I don't care what fields match or don't.

The entire model of online lenders is that once you acquire a borrower, you hold on to them as tight as possible. Lenders don't make money on the first loan because acquisition costs are so high. You make money on the 2nd or 3rd loan where you're not paying to acquire them. The notion that only .1% or 1% or 5% of borrowers are getting a 2nd loan would be an indication that the business has long since failed. You don't make money servicing one loan and then sending the borrower on their merry way.
« Last Edit: February 24, 2017, 09:49:19 AM by SeanMCA »
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jheizer

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Re: LC prepayments rising
« Reply #49 on: February 24, 2017, 10:21:02 AM »
.1%, no way. 5% is too low, not too high. On the small business lending side of online lending, the percentage of customers who take a 2nd loan from their lender is 50%+. For some companies it's around 80%.

But is that really comparable here?  Companies always need working capital for orders, etc.


At a minimum, I would have to guess that at least 20% of Lending Club's borrowers are taking a 2nd loan. I don't care what fields match or don't.

The entire model of online lenders is that once you acquire a borrower, you hold on to them as tight as possible. Lenders don't make money on the first loan because acquisition costs are so high. You make money on the 2nd or 3rd loan where you're not paying to acquire them. The notion that only .1% or 1% or 5% of borrowers are getting a 2nd loan would be an indication that the business has long since failed. You don't make money servicing one loan and then sending the borrower on their merry way.

Remember too here I was specifically trying to find the number of LC refis.  Not just multiple loans over years.  Part of why I was being extra strict in my matching with the intent to extrapolate up from there.  I loosened the matching to close to your 20% number (21,6196 People) and I'm doing a run now.  But it might take a while since that means it has to process 42k of LC loans.

« Last Edit: February 24, 2017, 10:22:35 AM by jheizer »
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SeanMCA

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Re: LC prepayments rising
« Reply #50 on: February 24, 2017, 10:55:40 AM »
The name of the game LC is in is to give as many loans to their good paying borrowers as they can handle for as long as they can handle them. Even more so since they're publicly traded and criticized on every metric like how many loans they're making each quarter. They're likely pounding existing borrowers in good standing with offers to take another loan. POUNDING. I have seen borrowers talk about this on consumer forums.

 
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jheizer

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Re: LC prepayments rising
« Reply #51 on: February 24, 2017, 04:30:40 PM »
First run this morning failed out of memory.  Had to clean up my code a bit.

So with the much looser same person detection, out of 261,189 people (so at least 522378 loans) where the first one is in "Fully Paid" status and the second one:
40,702 - ... is ONE letter grade better or more.
8,469- ... is ONE letter grade better or more and the second loan was started after 350 days and before 550 days of the first loan.

So still out of 1.3M loans not that many point to LC solicited refis soon after 1 year.  I can run it with other date ranges or what ever else someone may want.  Note that running against all these took a few hours.  If we have a few I'll move my DB to the SSD to speed things up.
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Rob L

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Re: LC prepayments rising
« Reply #52 on: February 24, 2017, 08:48:22 PM »
If we have a few I'll move my DB to the SSD to speed things up.

Move it to your RAID 0 dual M.2 NVMe SSD's.  :) LOL, maybe someday I'll save up for a rig like that.

jheizer

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Re: LC prepayments rising
« Reply #53 on: February 24, 2017, 09:11:23 PM »
If we have a few I'll move my DB to the SSD to speed things up.

Move it to your RAID 0 dual M.2 NVMe SSD's.  :) LOL, maybe someday I'll save up for a rig like that.

My desktop has a single M.2 drive, i7, and 16GB ram.  Its nice when work and play interests overlap (and foot the bill).  I even have enough room for this tiny DB there.  Server is more storage based with many TB of ZFS storage and one lonely little SATA SSD.

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RT45

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Re: LC prepayments rising
« Reply #54 on: February 24, 2017, 10:19:25 PM »
This is an area I have spent an extensive amount of time in looking at behavior of repeat / pre-paid borrowers.

I agree with SeanMCA with the 20% figure. Renaud previously stated that 14% of borrowers were repeat borrowers and that was nearly two years ago. He didn't specify how many had simultaneous loans outstanding or were used to pay off another loans - and yes, LendingClub absolutely DOES have this data, unless they are somehow not collecting Social Security Numbers for every borrower - which they are.

We also know that in month 8th, LendingClub begins soliciting refinances of the existing borrowers and is actively promoting it.

Conservatively there are at least 20k borrowers with matching credit profiles, closer to 30k at this point that are either repeat borrowers / pre-pay / or have simultaneous loans outstanding.

Source: https://www.bloomberg.com/news/features/2016-08-18/how-lending-club-s-biggest-fanboy-uncovered-shady-loans


Fred93

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Re: LC prepayments rising
« Reply #55 on: February 25, 2017, 02:56:21 PM »
Conservatively there are at least 20k borrowers with matching credit profiles, closer to 30k at this point that are either repeat borrowers / pre-pay / or have simultaneous loans outstanding.

Presuming that 30k number is right ...
That's out of 1.3 Million loans. 

Lets see 30K/1300k = 2.3%

2.3% just doesn't seem like a big number to me.

Rob L

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Re: LC prepayments rising
« Reply #56 on: February 28, 2017, 03:45:17 AM »
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'm up to 5 of the 259 loans bought beginning 1/31/2017 pre-pay in month zero.
Days from loan issue to fully paid were 10, 18, 24, 24 and 31 (1.9%). In line with LC's number but still crazy to me.

jheizer

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Re: LC prepayments rising
« Reply #57 on: March 01, 2017, 11:10:49 AM »
I was just sitting here thinking about a very simple way to see if in my own account if prepayments were increasing or not.  I only have the last 14 months of this data on hand and I included the average age of the notes since that could also have an effect.  But the of loans going into the fully paid status each month has been really stable for me.



Green = Average age of the portfolio
Blue = Total number of notes in the Fully Paid status
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fliphusker

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Re: LC prepayments rising
« Reply #58 on: March 01, 2017, 03:23:24 PM »
I am seeing a spike of prepayments in the past month.  The vast majority are coming in regards to my FOLIO notes.  As I do not buy notes at a premium it is not a huge deal. 
But what I do find strange is that a lot of these notes have a sub 640 FICO with under 20 payments remaining.  One that just prepaid had around $6k left with a 560 FICO.  Who refinances that?  One, in particular, had 600 FICO with IGP the past three months. 
This is a bit concerning if there really is a credit market out there that is willing to take on borrowers with such shaky credit. 
Kudos to the guy for getting out from underneath his 19% rate.  (He was a cop who rents making 48k/year.)

dr.everett

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Re: LC prepayments rising
« Reply #59 on: March 01, 2017, 03:54:35 PM »
Bear in mind that we are into tax season- people may be taking tax returns (assuming they get them) and using them to pay off debt. (If they are wise)

I check my full pays daily and move them to a folder. This morning I had 40 fulls in my IRA, and about 15 in my Taxable account.

I mention the tax refunds because I already received my State refund back- a week after I filed. Waiting on the Fed refund- would be nice if it came this week.  ;D