Author Topic: LC originations taking too long  (Read 11769 times)

Dennis

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LC originations taking too long
« on: March 28, 2013, 01:46:17 AM »
I've been investing in a lot of notes lately at LC that get fully funded within a couple of days, some within a couple of hours, but only to have many of them sit at LC for weeks without originating ("In Review").  It used to take only a few days or maybe a week at the most for a note to originate, but that seems to have changed.  I'm fearing that many of these borrowers are giving up because of the long wait.  When I checked my last dozen or so notes that "expired," ALL of them had the "Withdrawn by Applicant" message - in other words the borrower gave up waiting (at least that's what I think).  Anyone else noticing this?
« Last Edit: March 28, 2013, 02:21:40 AM by Dennis »

DanB

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Re: LC originations taking too long
« Reply #1 on: March 28, 2013, 07:32:40 AM »
Dennis.............Once upon a time, loans did take 9-10 or even the full 13 days to fund. Then they'd sit "in review" for another week or so, as you pointed out. So if you were to add those numbers together, you'd come up with 17-21 days. Today, as you correctly pointed out, many loans can fund in just several hours. That being the case, why is it surprising, alarming or distressing if they sit in review for 2-3 weeks?  Sounds like pretty much the same amount of time to me.

BTW, "withdrawn by applicant" can mean various things, other than its literal meaning. If you are seriously suggesting that a borrower with a fully funded loan sitting "in review" is going to just yank their application & say that it's just taking too long, I'm not waiting a few more days & I don't want the loan anymore..............then I'm not sure what to say because I doubt I can come up with a diplomatic response that will adequately convey my impression of your assessment of basic human behavior.  :)

Cliff_S

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Re: LC originations taking too long
« Reply #2 on: March 28, 2013, 09:09:58 AM »
Today, as you correctly pointed out, many loans can fund in just several hours. That being the case, why is it surprising, alarming or distressing if they sit in review for 2-3 weeks?  Sounds like pretty much the same amount of time to me.

From a Lean perspective your analysis suggests that their TAKT time is moving in the wrong direction.  Obviously with the growth they are experiencing that is to be expected if they don't optimize the approval process and add additonal resources to keep up with the loan demand.  I can't speak for certain, but other posts on this forum suggest they are doing just that.
It is not simply okay that loan approval is taking longer even if the overall time to fund and approve is the same as it was months ago. 

Cliff

SkaXc0re77

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Re: LC originations taking too long
« Reply #3 on: March 28, 2013, 11:06:59 AM »
I don't mind the review process when I click a note in review and it still says review.  That too me is ok - It makes me feel like LC really is doing its due diligiance to make sure I dont get burnt.

What bothers me is when the loan gets that little green check mark and doesnt flip to issued!!!

That to me is time wasted (even if its a day or 2, still....)

Peter

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Re: LC originations taking too long
« Reply #4 on: March 28, 2013, 04:23:57 PM »
Here is an interesting anecdote from an LC borrower who is currently waiting for his funds:
http://yourpfpro.com/my-first-default-with-lending-club/#comment-2977

While this guy doesn't look like he is going to cancel the loan he is clearly not happy. LC has some improving to do in this area - you don't tell the borrower 3-4 days and then take 12-14.
Publisher of the Lend Academy blog

See my returns here: http://www.lendacademy.com/returns

DanB

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Re: LC originations taking too long
« Reply #5 on: March 28, 2013, 07:27:26 PM »
Oh, I don't disagree that there is a lot of room for improvement here. What I disagree with is the notion that borrowers with fully funded loans are yanking their applications in mass because its taking a week or 10 days more than was stated to get the money. Yeah, right.

 Also from an investors viewpoint................few (if any) here have been a critic of the prolonged time it takes to "fund & issue", as I have. I wrote one of my first posts here about that very matter over 2 1/2 years ago. I'm just saying that for an investor things haven't gotten substantially worse on this matter from where I'm sitting.

mitgib

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Re: LC originations taking too long
« Reply #6 on: March 28, 2013, 08:41:23 PM »
I don't know if it was when Peter took his trip to LC or it was posted on the LC Facebook page, but they looked close to finishing office space expansion, I would assume for many more people to join their team, but with the constant growth, I can only imagine they under built and will revisit these issues again quickly.  Obviously they are in the bay area for a reason, but how much talent trained for the tasks they require are local?  Charlotte was/is a major banking city with many out of work from that sector, Kansas City is another city really growing as a tech focused city, and then the research triangle also in North Carolina.  I'm not suggesting LC move, but adding where there is talent and lower overhead might not be the worst idea ever.

Fred

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Re: LC originations taking too long
« Reply #7 on: March 30, 2013, 10:11:00 AM »
Can somebody share what exactly LC does to originate a loan?

I know the answer can be "depends on the loan", but I'd like to get a bird's eye view on the major steps and approximate time for each step.

edward

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Re: LC originations taking too long
« Reply #8 on: March 30, 2013, 06:57:59 PM »
With as much automation as their system allows, it would seem that having people working on both coasts would be advantageous to them as it would allow 3 hours earlier/longer office time for all types of functions including collections, as well as allow for dual-sites for back-up and disaster recovery capabilty. Of course having everyone in one office does help internal communications.

But as to originations taking longer, that's probably more a function of LC staffing, loan volume, as well as better informing borrowers of the information needed before they apply for a loan, and having borrowers who recognize the importance of getting that information into LC as quickly as possible. That's not too much to ask... ;)

edward

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Re: LC originations taking too long
« Reply #9 on: March 30, 2013, 07:23:58 PM »
Fred, more to the point of your question about what goes into review, here is the relevant portion of the LendingClub Prospectus:

Verification of Borrower Information

Approximately 60% of the applicants during the 12-months ended September 30, 2012 had their employment or income verified by us by requiring the borrower to submit paystubs, IRS Forms W-2 or other tax records between the initial posting of a loan reques and the issuance of a Member Loan. We perform targeted income verification primarily in the following situations:

• if we believe there may be uncertainty about the borrower member’s employment or future income;
• if we detect conflicting or unusual information in the loan request;
• if the loan amount is high;
• if the borrower member is highly leveraged;
• if we suspect the borrower member may have obligations not included in the borrower member’s pre-loan or post-loan debt level, such as wage garnishment collection accounts; or
• if we suspect a fraudulent loan request.

We also conduct random testing. From time to time, we also randomly select listings to verify information for the purpose of testing our policies and for statistical analysis. If the borrower member fails to provide satisfactory information in response to an income or employment verification inquiry, we may remove the borrower Member’s Loan listing or request additional information from the borrower member. We conduct income or employment verification entirely in our discretion as an additional credit and loan screening mechanism. We believe that our ability to verify a borrower member’s income may be useful in certain circumstances in screening our platform against exaggerated income and employment representations from borrower members. Investors, however, should not rely on a borrower member’s stated employment or income, except when such income or employment has been verified as indicated on the loan details page, or on our ability to perform income and employment verifications. We cannot assure investors that we will continue performing income and employment verifications. See “Risk Factors – Information supplied by borrower members may be inaccurate or intentionally false.”

Except as discussed above, borrower member information such as loan title, description, and answers to investors’ questions through the Q&A process are unverified and investors should not rely on this information. Additionally, we do not verify borrower member’s ability to afford a loan the borrower member has requested.

Our participation in funding loans on the platform from time to time has had, and will continue to have, no effect on our income or employment verification process, the selection of loan requests verified or the frequency of income and employment verification.

For the year ended June 30, 2012 of the borrower members undergoing income or employment verification:
• approximately 60% of requested borrowers provided us with satisfactory responses;
• approximately 8.4% of these borrowers withdrew their applications for loans; and
• approximately 31.6% of these borrowers either failed to respond to our request in full or provided information that failed to verify their stated information.

Fred

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Re: LC originations taking too long
« Reply #10 on: March 30, 2013, 11:48:52 PM »
Thanks edward.

I am also a landlord, and perform background check on new tenants.

I used a third-party provider to verify income, employment, etc., of a prospective tenant.  It cost me about $40 and took 3-5 days.

Besides, it seems that 40% of the borrowers do not go through this intensive verification.  I'd assume this means their loans are quickly originated once fully funded. 

However, I don't think this is the case for me.  I invest mostly on D-G loans, and most of them seem to take 5-7 days to originate after being 100% funded.  (Have not really done data analysis on this, but it sure feels that way.)




donmiller

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Re: LC originations taking too long
« Reply #11 on: April 01, 2013, 09:31:33 AM »
IMHO, LC should consider shuffling their review process around a bit.

When it was actually taking borrowers 8 to 13 days to get their loans funded, it made a lot of sense to do some of the up-front verification in parallel with the funding process -- get the notes on the platform ASAP so lenders could start lining up funding.

Now, it is taking just a day or two to get funded, and lenders are being jerked around by having their "in funding" notes cancelled at alarming rates.

Perhaps LC should work on these notes for perhaps 3 days or so before putting them on the market.  Given the current speed at which notes are funded after listing, delaying the listing until after some cursory checks are done would not slow things down one bit.


Lovinglifestyle

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Re: LC originations taking too long
« Reply #12 on: April 01, 2013, 07:45:50 PM »
I agree with donmiller.  I'm starting to burn out since it takes more time to also look up all loans that interest me on both PeerCube and Interest Radar.  Often PC and/or IR don't have the loan in the first place I look, but do or don't in the second--even when I wait 13 and 3 minutes respectively.

Whatever--the point is that choosing something is a whole lot more time consuming than it was and the cancellations amplify that.  It is more work and less fun to pick manually than it used to be. 

Today was good.  Only two were cancelled and sixteen were issued!!!  Helped make up for last week.

edward

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Re: LC originations taking too long
« Reply #13 on: April 01, 2013, 10:33:43 PM »
For the year ended June 30, 2012 of the borrower members undergoing income or employment verification:
• approximately 60% of requested borrowers provided us with satisfactory responses;
• approximately 8.4% of these borrowers withdrew their applications for loans; and
• approximately 31.6% of these borrowers either failed to respond to our request in full or provided information that failed to verify their stated information.


It's the 40% here that bothers me--that upfront investigations would have stopped from even being on the platform. It's not the funding that's needed anymore, its the quality of the information that is now important to work on. Let the institutional investors who are buying whole loans take their chances with unverified info, but verify the information if you're going to release it for retail investors.

DanB

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Re: LC originations taking too long
« Reply #14 on: April 01, 2013, 11:39:57 PM »
edward.........Uh-huh. Of course you do understand that the 40% you're referring to isn't 40% of the total number of loans, but rather it is 40% of the loans that LC chooses to do verification on. About half of all loans don't go through employment or income verification. So since you have a problem with unverified info., are you suggesting that LC not release any of these unverified loans to retail investors at all?  In addition to holding back the ones that they intend on doing some verification on?
Also, since LC does not tell us which loans undergo income verification only, as opposed to employment verification only, as opposed to both income & employment verification, are you suggesting that LC hold back from retail investors partially verified loans too??