Author Topic: Loan status migration / adjustment numbers - weird  (Read 2103 times)

rj2

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Loan status migration / adjustment numbers - weird
« on: December 09, 2017, 04:44:39 AM »

Lending club has an "adjustment for past due notes" based on what it claims are "loan status migration over 9 months". You can flip it on and off, or customize it. I have always customized it to be more aggressive than what LC sets for 31-120 day lates and defaults.

Well I was looking today to see if I should adjust those settings again and I noticed that sometime since I last looked (over a year at least) Lending Club has updated it in a weird way.

Here are their current adjustments:

0% - Current
31% - In Grace
62% - 16-30 late
88% - 31-120 late
72% - default

Yes that's right, they are listing DEFAULT as having a lower 9 month loss estimate than 31-120 days late.

How is that even possible?


Fred93

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Re: Loan status migration / adjustment numbers - weird
« Reply #1 on: December 09, 2017, 05:35:33 AM »
My guess is that these numbers are mechanically produced, without human thinking.  They take the payment history file, and run it thru a program that computers over the last X months what the statistics were, and then they pop those numbers in. 

I agree with you that for future predictive power, the present choices don't make much sense.  However, as a practical matter, there are very few loans in the "default" state, 'cause loans don't stay there very long.  That's probably why the mechanical process produces a flaky number, but it also means it won't change your account value much.

OleBill

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Re: Loan status migration / adjustment numbers - weird
« Reply #2 on: December 10, 2017, 07:01:10 AM »
Apparently not all notes move from late through default to charged off. Some skip default and go from late to charged off.

AnilG

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Re: Loan status migration / adjustment numbers - weird
« Reply #3 on: December 10, 2017, 07:51:24 AM »
Quote
Yes that's right, they are listing DEFAULT as having a lower 9 month loss estimate than 31-120 days late.

The lower 9 month loss estimate for Default loan is due to taking into account the amount recovered after charge off. It is more likely that some recovery may be made in 9 months after loan went into default. Significantly long time period for a recovery/collection effort to succeed.

The 31-120 days late loan can take first 1-4 months to go into default. That only leaves only 5-8 months in 9 month period for any recovery to take place and being accounted in 9 month loss estimate for 31-120 days late loans.

Basically, difference is recovery in next 9 months for defaulted loans versus recovery in next 5 to 8 months for 31-120 days late loans.
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jrr6415sun

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Re: Loan status migration / adjustment numbers - weird
« Reply #4 on: December 18, 2017, 02:40:21 AM »
wow my custom loss estimates I put around 10% higher than lending club's estimates. I haven't looked in awhile and now my estimates are lower than LC's. Must have been a ton more loss in the last 9 months than previously.