Author Topic: Recovery rates broken down by credit grade?  (Read 3459 times)

flyp52

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Recovery rates broken down by credit grade?
« on: January 04, 2013, 12:02:11 PM »
Does anyone know if any of the statistics/analysis sites can produce a Recovery Rate by Loan Status chart similar to the one at Lending Club https://www.lendingclub.com/info/statistics-performance.action, but broken down by Credit Grade also?

Thanks.

AmCap

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Re: Recovery rates broken down by credit grade?
« Reply #1 on: January 04, 2013, 12:21:12 PM »
The short answer is not really. There was extensive discussion of that issue in an earlier post on the FMV of distressed notes.Search FMV and you should find it.

rev

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Re: Recovery rates broken down by credit grade?
« Reply #2 on: January 04, 2013, 06:04:47 PM »
flyp52,

I have created a Rollover Report that has a different purpose, but may answer the question you asked.
http://www.interestradar.com/rollover

What you're interested in is the blue table, with the loans in a Late status that went back either to Current or Fully Paid or Payment Plan; or loans in Default that went back to Current/Fully Paid/Payment Plan or also Late (sometimes the pay but still stay behind).

A word of warning: a single loan may become late and current and late and current several times in the course of its life. The chart I present is the total roll rate, i.e., the average chance you have that a loan will go late, regardless if it was never late or not. In the future I may add filters to show "never late", "late once" etc.

AmCap

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Re: Recovery rates broken down by credit grade?
« Reply #3 on: January 04, 2013, 09:03:54 PM »
Right but rev, as I think we wrestled with earlier, LC doesn't give us data on how much is actually recovered on a distressed noted that survives (i.e., isn't charged off).  Put another way, just because a distressed loan goes current doesn't tell us much about how much is ultimately recovered...

Zach

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Re: Recovery rates broken down by credit grade?
« Reply #4 on: January 04, 2013, 09:49:48 PM »
flyp52,

I have created a Rollover Report that has a different purpose, but may answer the question you asked.
http://www.interestradar.com/rollover

What you're interested in is the blue table, with the loans in a Late status that went back either to Current or Fully Paid or Payment Plan; or loans in Default that went back to Current/Fully Paid/Payment Plan or also Late (sometimes the pay but still stay behind).

A word of warning: a single loan may become late and current and late and current several times in the course of its life. The chart I present is the total roll rate, i.e., the average chance you have that a loan will go late, regardless if it was never late or not. In the future I may add filters to show "never late", "late once" etc.

If I'm reading the cure rates column correctly, it is suggestive that true recovery rates are about 11.6%, whilst Lending Club suggests they have a recovery rate of about 53% on  31-120 days late, and 77% on 16-30 day lates. Am I missing something?

william

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Re: Recovery rates broken down by credit grade?
« Reply #5 on: January 04, 2013, 09:56:17 PM »
I think it's because the chart at LC is a very small sample size between April-October 2011

Zach

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Re: Recovery rates broken down by credit grade?
« Reply #6 on: January 04, 2013, 10:01:50 PM »
I think it's because the chart at LC is a very small sample size between April-October 2011

That could very well be the case. I would like to think their collections efforts aren't that concentrated on a specific time period :)

If they were consistently following their collections practices, there should be very little/no differential in recovery rates from different vintages.

Just thought of this now:

Rev - Are the cure rates shown based on recovery from one month to the next or if the loan recovers at all? For example, do you factor in recovery if the loan is late in January, still late in February, but recovers in March?

(this could be the issue maybe)

rev

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Re: Recovery rates broken down by credit grade?
« Reply #7 on: January 05, 2013, 10:18:44 AM »
I think their numbers are accurate. When you look at all notes that were once Late 31-120 and check their CURRENT status, 53% of them are current or paid off.
What you read in my chart is that, in average, if you have X late notes in your portfolio, you can expect 11% of X to become current every month, and 89% to stay late or default/charge off.