Author Topic: Worst Loan of the Day Thread, Grades A - C  (Read 6839 times)

SLCPaladin

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Re: Worst Loan of the Day Thread, Grades A - C
« Reply #15 on: December 21, 2017, 11:42:42 AM »
Much appreciated Rob L.

Rob L

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Re: Worst Loan of the Day Thread, Grades A - C
« Reply #16 on: December 21, 2017, 06:00:07 PM »
Just so it doesn't seem as if there aren't some really bad A grade notes out there:

https://www.lendingclub.com/browse/loanDetail.action?loan_id=126165764

LC assigns an A3 grade, 1.84% probability of default and a 6.72% APR? Who buys this stuff?

Rob L

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Re: Worst Loan of the Day Thread, Grades A - C
« Reply #17 on: December 23, 2017, 12:07:40 PM »
Maybe the worst A, B and C of the previous day or two would be interesting.
Also, the $ amount of funding per investor has historically shown the popularity a loan (the larger the amount and/or fewer investors the more popular the loan). If wisdom of the crowd has any relevance then the larger the amount the better the loan. That's the third parameter before the URL.

A5,   7.97%, $34.19  https://www.lendingclub.com/browse/loanDetail.action?loan_id=126198526
B4, 10.91%, $35.46  https://www.lendingclub.com/browse/loanDetail.action?loan_id=126104375
C2, 13.59%, $37.73  https://www.lendingclub.com/browse/loanDetail.action?loan_id=126147546

Examples of loans that scored highly:
C4, 15.05%, $50.79  https://www.lendingclub.com/browse/loanDetail.action?loan_id=126200380
C5, 16.02%, $91.86  https://www.lendingclub.com/browse/loanDetail.action?loan_id=125954804

« Last Edit: December 23, 2017, 12:32:52 PM by Rob L »

Rob L

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Re: Worst Loan of the Day Thread, Grades A - C
« Reply #18 on: December 28, 2017, 02:25:57 PM »
Couldn't let this one pass without a post.  Worst score yet:

B2,  9.93%, $33.23   https://www.lendingclub.com/browse/loanDetail.action?loan_id=126185226


Rob L

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Re: Worst Loan of the Day Thread, Grades A - C
« Reply #19 on: December 30, 2017, 09:09:35 AM »
A new absolute worst A,B or C record holder:

B2,  9.93%,  $34.78   https://www.lendingclub.com/browse/loanDetail.action?loan_id=126423450

I'll say again, who buys this stuff?
An amazingly bad deal for the lender and it's hard to imagine anyone would disagree.


Rob L

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Re: Worst Loan of the Day Thread, Grades A - C
« Reply #20 on: December 31, 2017, 06:17:04 PM »

Edward Reid

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Re: Worst Loan of the Day Thread, Grades A - C
« Reply #21 on: January 01, 2018, 12:49:51 PM »
Interesting. Your model's scores appear to correlate strongly with credit record and employment info (present or not), which is no surprise. I don't think I disagreed with any of the ones your model downrates.

Examples of loans that scored highly:
C4, 15.05%, $50.79  https://www.lendingclub.com/browse/loanDetail.action?loan_id=126200380
C5, 16.02%, $91.86  https://www.lendingclub.com/browse/loanDetail.action?loan_id=125954804

I agree on the first but would not touch the second.
  • Makes $500K/yr but has $80K revolving debt.
  • Why moving? Job offer or lost job?
  • Entered exactly $500,000 for income. I don't mind some rounding, but rounding to the nearest half million strikes me as suspect even though it's marked verified.
  • How many football coaches make $500K/yr? Some of course, but this person is in elevated status and needs a loan from LC?
  • Jumped for the $35K instead of calculating how much they needed.
Other signs are good of course -- clean credit record, and more than ten years of credit history. Still, I don't like it.

Edward

Rob L

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Re: Worst Loan of the Day Thread, Grades A - C
« Reply #22 on: January 01, 2018, 06:52:52 PM »
Interesting. Your model's scores appear to correlate strongly with credit record and employment info (present or not), which is no surprise. I don't think I disagreed with any of the ones your model downrates.

Examples of loans that scored highly:
C4, 15.05%, $50.79  https://www.lendingclub.com/browse/loanDetail.action?loan_id=126200380
C5, 16.02%, $91.86  https://www.lendingclub.com/browse/loanDetail.action?loan_id=125954804

I agree on the first but would not touch the second.
  • Makes $500K/yr but has $80K revolving debt.
  • Why moving? Job offer or lost job?
  • Entered exactly $500,000 for income. I don't mind some rounding, but rounding to the nearest half million strikes me as suspect even though it's marked verified.
  • How many football coaches make $500K/yr? Some of course, but this person is in elevated status and needs a loan from LC?
  • Jumped for the $35K instead of calculating how much they needed.
Other signs are good of course -- clean credit record, and more than ten years of credit history. Still, I don't like it.

Edward

All valid concerns. When in doubt, pass and wait for another.
Should be interesting to come back to this one from time to time and see how things are going.
The "wisdom of the crowd" at $91.86 per note seems to imply it might be ok.

PS: Some coaches are paid an insane amount of money. The highest paid I think is Nick Saban.

USA TODAY Sports Published 9:55 a.m. ET May 2, 2017: "Alabama football coach Nick Saban will be paid $11.125 million this season under a three-year contract extension that includes a $4 million signing bonus approved Tuesday by the university board of trustees’ compensation committee. Altogether, the eight-year deal running through Jan. 31, 2025, is scheduled to pay Saban $65 million, not including incentive bonuses that could total $700,000 each year."

What a world.

Edward Reid

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Re: Worst Loan of the Day Thread, Grades A - C
« Reply #23 on: January 01, 2018, 07:57:14 PM »
The "wisdom of the crowd" at $91.86 per note seems to imply it might be ok.

94% of the crowd are getting lower returns than I am. 99% with similar age and WAIR.

Quote
Some coaches are paid an insane amount of money.

Them and CEOs ...

Quote
What a world.

To put it mildly.

AnilG

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Re: Worst Loan of the Day Thread, Grades A - C
« Reply #24 on: January 03, 2018, 08:43:46 AM »
What is wrong with this loan? I don't see anything that stands out. It is just someone going through divorce most probably. Is it just your model saying it is a bad loan?

https://www.peercube.com/comment?loanid=126456415

Happy New Year!

C4,  15.05%,  $30.11   https://www.lendingclub.com/browse/loanDetail.action?loan_id=126456415
---
Anil Gupta
PeerCube Thoughts blog https://www.peercube.com/blog
PeerCube https://www.peercube.com

Edward Reid

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Re: Worst Loan of the Day Thread, Grades A - C
« Reply #25 on: January 03, 2018, 09:28:41 AM »
C4,  15.05%,  $30.11   https://www.lendingclub.com/browse/loanDetail.action?loan_id=126456415
What is wrong with this loan? I don't see anything that stands out. It is just someone going through divorce most probably. Is it just your model saying it is a bad loan?
From my manual-evaluation PoV ... I don't see why it would be worst-of-worst. I would reject it due to the past delinquency and major derogatory, but the great majority of C-grade loans have one or both of those. DTI is high and loan request is for over twice the revolving balance -- I don't consider those absolute disqualifications, but I consider that DTI very significant, the amount mismatch not very significant at this level.

I'd find it very interesting if Rob's model seriously downrates any C-grade loans which have no history of delinquency or derogatories. Those are two of my outright disqualifiers, the others being less than ten years credit history, no evidence of employment, and huge amount of revolving debt. Since my criteria are manual and untested (albeit so far apparently very successful), it's very interesting to compare with the statistical approach.

Edward

Rob L

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Re: Worst Loan of the Day Thread, Grades A - C
« Reply #26 on: January 03, 2018, 10:47:20 AM »
C4,  15.05%,  $30.11   https://www.lendingclub.com/browse/loanDetail.action?loan_id=126456415
What is wrong with this loan? I don't see anything that stands out. It is just someone going through divorce most probably. Is it just your model saying it is a bad loan?
From my manual-evaluation PoV ... I don't see why it would be worst-of-worst. I would reject it due to the past delinquency and major derogatory, but the great majority of C-grade loans have one or both of those. DTI is high and loan request is for over twice the revolving balance -- I don't consider those absolute disqualifications, but I consider that DTI very significant, the amount mismatch not very significant at this level.

I'd find it very interesting if Rob's model seriously downrates any C-grade loans which have no history of delinquency or derogatories. Those are two of my outright, the others being less than ten years credit history, no evidence of employment, and huge amount of revolving debt. Since my criteria are manual and untested (albeit so far apparently very successful), it's very interesting to compare with the statistical approach.

Edward

It's not the worst of the worst, but the model says its pretty bad. I think it's an accumulation of things; 3 inquires, pretty high DTI, large loan amount compared to income, and large revolving balance. The logit model doesn't use the loan grade in scoring since that's a product of LC's model rather than fundamental borrower data. The logit model computes probability of default (PD) but then the final score is computed as a function of PD (risk) and LC assigned interest rate (reward). So, if the interest rate were higher the score would also be higher. If the interest rate were lets say 25% this might score as a pretty good loan. I don't know. The bottom line is that the risk / reward of this loan is computed to be quite poor. BTW, the loan is still less than 50% funded at this time so it seems to be unpopular with many.

There was an interesting thread a few years ago "What's This Best Note Selection Business Anyway" that goes back to a time when personally I was very skeptical regarding the very possibility of retail lenders picking best notes.

https://forum.lendacademy.com/index.php/topic,1953.0.html

It was pointed out by Emmanuel that LC's model may have a different objective than that of an individual lender and that made a lot of sense to me. It makes even more sense now that LC now only provides its model's PD over full letter grades rather than over sub-grades. Could be their objective is maximized originations while achieving the targeted PD over entire grades. That implies to me that more than ever we lenders should be able to identify better or worse loans. However it doesn't imply how many if any attractive loans there are.

Edward Reid

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Re: Worst Loan of the Day Thread, Grades A - C
« Reply #27 on: January 03, 2018, 03:17:49 PM »
There was an interesting thread a few years ago "What's This Best Note Selection Business Anyway" that goes back to a time when personally I was very skeptical regarding the very possibility of retail lenders picking best notes.

https://forum.lendacademy.com/index.php/topic,1953.0.html

It was pointed out by Emmanuel that LC's model may have a different objective than that of an individual lender and that made a lot of sense to me. It makes even more sense now that LC now only provides its model's PD over full letter grades rather than over sub-grades. Could be their objective is maximized originations

Thanks for the link -- interesting indeed. I actually like the formulation by neals384, which is basically what I bolded above. That does mean satisfying investors, but they don't have to outrun the bear, only the other guy. As long as enough investors (individual and institutional) are happy with the returns received for effort expended, improving the predictions might actually be detrimental to their goals by discouraging investment over a broad range of loan grades. And we already know that they claim investing in several grades is diversification, when I see it only as dilution of my goals.

Edward

Rob L

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Re: Worst Loan of the Day Thread, Grades A - C
« Reply #28 on: January 06, 2018, 09:53:46 AM »
A new absolute worst of the worst, A, B and C:

B5,  11.99%,  $36.30,  https://www.lendingclub.com/browse/loanDetail.action?loan_id=126152170

BTW, this interesting loan below scored very well.
Typically a FICO of 810 merits a loan grade better than C3 so the LC model sees something that makes this loan much more risky than FICO indicates.

C3,  14.08%,  $60.28  https://www.lendingclub.com/browse/loanDetail.action?loan_id=126651939
« Last Edit: January 06, 2018, 10:00:11 AM by Rob L »

Edward Reid

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Re: Worst Loan of the Day Thread, Grades A - C
« Reply #29 on: January 06, 2018, 10:50:31 AM »
Interesting indeed, both of them.

A new absolute worst of the worst, A, B and C: B5,  11.99%,  $36.30

I don't even look at "business" loans, and if I did, I'd be suspicious because the revolving balance is so close to the loan amount, so it may really be debt consolidation -- with which I have no problem when it's truthful. And the Public Record On File -- I avoid those even though I've never figured out exactly what it means. ::)  Oh, and three inquiries -- I haven't been looking at that number, though perhaps I should. Nothing obviously explains why the model dislikes it so strongly. Others seem to agree ... funding is going very slowly.

Quote
BTW, this interesting loan below scored very well. Typically a FICO of 810 merits a loan grade better than C3 so the LC model sees something that makes this loan much more risky than FICO indicates. C3,  14.08%,  $60.28

Apparently 107 people agreed with your model, since it was already fully funded by the time I looked. High DTI and loan purpose "other" (I would not have seen in in my normal scan because of the latter), but no reason to disagree with the model.

Edward