P2P Lending

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MachineGhost
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Re: P2P Lending

Postby MachineGhost » Fri Jun 10, 2016 9:51 pm

Image
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
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Re: P2P Lending

Postby MachineGhost » Fri Jun 10, 2016 9:53 pm

This is massively inaccurate, so have fun with it:

http://www.nytimes.com/2016/05/15/busin ... tails.html
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
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sophie
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Re: P2P Lending

Postby sophie » Fri Jun 10, 2016 9:55 pm

I'd look into the stats to see if there really has been a jump but...

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It's been 3 days now. Wonder if they use Arvixe.
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Re: P2P Lending

Postby MachineGhost » Fri Jun 10, 2016 10:19 pm

sophie wrote:I'd look into the stats to see if there really has been a jump but...

Image

It's been 3 days now. Wonder if they use Arvixe.


I've no problems. I was just on it a few days ago for the statements and just now. Do a traceroute?
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
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Re: P2P Lending

Postby sophie » Sat Jun 11, 2016 8:39 am

It's been up and down. Down right now but was up briefly last night.
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MachineGhost
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Re: P2P Lending

Postby MachineGhost » Sat Jun 11, 2016 6:11 pm

sophie wrote:It's been up and down. Down right now but was up briefly last night.


I think you'll get a kick out of this...

http://seekingalpha.com/article/3981272 ... t-72448249
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
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sophie
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Re: P2P Lending

Postby sophie » Fri Jul 08, 2016 10:21 am

Despite the glowing jobs report that came out today, I've seen an enormous jump in Lending Club delinquencies recently. Could be chance but I have enough notes that I doubt this. Also, the delinquent notes are all ones funded in the past 2 years.

I'm used to seeing a chargeoff rate of ~7% per year, which would be right about in line with predictions. Right now this is what I have:

Grace Period: 3.2%
Late 16-30 days: 2.7%
Late 31-120 days: 2.0%

And this is after chargeoffs year to date of 4.9%. Almost all the above notes look like they are headed for chargeoff. Many of them are declaring bankruptcy or gave Lending Club a cease and desist order.

It looks to me like Lending Club loosened its borrower requirements quite significantly about 2 years ago while reducing interest rates, presumably to attract more borrowers so they can inflate their portfolios and collect more fees. And it works - despite the recent bad press, their loan issuance is still going up. Quite a conflict of interest. It was fun for a while but I think there are better places for VP money.
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MachineGhost
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Re: P2P Lending

Postby MachineGhost » Fri Jul 08, 2016 5:30 pm

sophie wrote:It looks to me like Lending Club loosened its borrower requirements quite significantly about 2 years ago while reducing interest rates, presumably to attract more borrowers so they can inflate their portfolios and collect more fees. And it works - despite the recent bad press, their loan issuance is still going up. Quite a conflict of interest. It was fun for a while but I think there are better places for VP money.


Not so fast! Before you give up, what you need is superior credit intelligence than what LC just provides out of the box. I just logged in to see my stats since Jan 2015:

Image

Grace Period: 0%
Late 16-30 days: 0.59%
Late 31-20 days: 0.59%
Charged Off: 1.18%

For a 11.59% adjusted net annualized return, 14.17% weighted average rate. I too have noticed a teeth gritting slight uptick recently, more obvious in my other account.

So head over to http://lendingalpha.com/ I asked them a lot of hard hitting questions initially and I am satisfied they really know what they're doing (as I would do things myself) and can weather and adapt to anything that comes. Worst case is breakeven in another 2008 crisis. But to make this work safely, you've got plan to DCA in over 5 years since the term composition is about 50%/50% split between three and five. I do deposits literally every week to smooth it out.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
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Re: P2P Lending

Postby sophie » Fri Jul 08, 2016 11:05 pm

Thanks for the pointer.

It comes down to whether you believe Lending Club's charge-off rate prediction - which LendingAlpha apparently does. It looks to me like LC is underestimating it by at least a factor of two.

Shame, because I really liked the model. Interestingly, a friend of mine invented something like this on a small scale years ago - he called it "the FOO Bank", established a 5% interest rate, and had a program running to calculate the daily interest with compounding and calculate/track payments. It was among friends of course. I had some money in it for a while.
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Re: P2P Lending

Postby MachineGhost » Sat Jul 09, 2016 2:50 am

My two charged off were D and E and were for debt consolidation purposes; they paid 26% and 36% of the balance before giving up the ghost. Of the graces, both are rated C (!); one is 31-120 days late for credit card refinancing, the other is 16-30 days late and is another debt consolidation. One paid 36% of the balance and the other 51% of the balance. I guess its true that if a note makes it well past 50%, you're unlikely to have a default?

Since you said you were focusing on F and G, I'm gonna speculate there's not enough loans in those grades to derive an accurate risk forecast. It's definitely early days, yet! Total volume might be impressive based on $ but it isn't for quantity:

subgrade: 1, loan count: 2826
subgrade: 2, loan count: 3166
subgrade: 3, loan count: 3529
subgrade: 4, loan count: 5871
subgrade: 5, loan count: 5102
subgrade: 6, loan count: 4055
subgrade: 7, loan count: 4796
subgrade: 8, loan count: 7085
subgrade: 9, loan count: 5344
subgrade: 10, loan count: 5189
subgrade: 11, loan count: 4663
subgrade: 12, loan count: 4303
subgrade: 13, loan count: 2612
subgrade: 14, loan count: 2504
subgrade: 15, loan count: 2162
subgrade: 16, loan count: 2676
subgrade: 17, loan count: 2299
subgrade: 18, loan count: 1696
subgrade: 19, loan count: 1368
subgrade: 20, loan count: 898
subgrade: 21, loan count: 661
subgrade: 22, loan count: 519
subgrade: 23, loan count: 388
subgrade: 24, loan count: 294
subgrade: 25, loan count: 234
subgrade: 26, loan count: 153
subgrade: 27, loan count: 134
subgrade: 28, loan count: 88
subgrade: 29, loan count: 79
subgrade: 30, loan count: 62
subgrade: 31, loan count: 50
subgrade: 32, loan count: 44
subgrade: 33, loan count: 31
subgrade: 34, loan count: 52
subgrade: 35, loan count: 67

I fail to understand how a lender can have a high FICO score to get in, yet somehow manage to grade E, F or G. And since defaults are banned, it's a diminishing supply of potential lenders over time. How did this lender even get their foot in their door?!!

Image
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!
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sophie
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Re: P2P Lending

Postby sophie » Sat Jul 09, 2016 7:37 am

I have 29 chargeoffs to date and 16 more clearly headed in that direction, so I have a somewhat larger sample size. I've seen chargeoffs follow a couple of separate patterns.

There's the group that charges off in the first year, often in the first few months. Most of those cases have to be fraud/criminal behavior. The borrower knows they're going to default on their credit card debt, and they have nothing to lose by snagging an extra $35K from a P2P lender beforehand. I'm disappointed that Lending Club hasn't done more to clamp down on this behavior. For example, they could set a rule that any cash disbursed has to be used first to pay off existing unsecured, non-student loan debt, like a balance transfer deal, and they transfer the money themselves rather than trusting the borrower to do it. In other words, act more like the banks do. They make it hard for people to get cash advances, and there is good reason for this.

The second group is the steady-state incidence of people losing their jobs, getting sick or even dying, etc. Remember these are the people with no savings, who couldn't fund an unexpected $1,000 expense. This is the 2% per year rate that banks experience. I've had loans charge off with just a few months remaining to pay off.

I suppose there may be another group that just gets tired of paying the loan after a year or two, and decides there's no real penalty if they stop paying - vs the very real "penalty" of not being able to buy the newest iPad or Xbox. The chargeoff rate definitely decreases about halfway through the loan.

Also: I'm focusing on E & F grades. No G.
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Re: P2P Lending

Postby MachineGhost » Sat Jul 09, 2016 5:42 pm

LA relies on its own models, not anything from LC. But, I didn't know back in the beginning both P and LC were truly P2P and "free market" as far as lenders setting rates went and a social networking thing. Because lenders had no clue what interest rate to charge, etc.. It was disaster prompting "intervention" where P and LC had to step in and start providing credit scores, rates, etc. all the usual jazz to lenders. So they're doing that service as an after thought not a primary reason for being. And that was a also disaster during the initial years as well which I'm much more familiar with. So I say don't even expect them to be competent at it. The self-interest just isn't there.

I've read LC's page on their collection practices and I'm left wanting more. Having lived through the hell of 12 creditors coming after me all all at once before charging off (and then getting handed off to a perpetual revolving door of collection agencies for at least 7 years afterwards), it's just not enough to do things the traditional old way. So your best defense is going to be as best an offense as possible from the very outset. Ruthlessly weed out as many potential deadbeats as you can. N\o mercy.

And I'm pretty disappointed LC allows in as low as a 640 FICO score as far back as 2012 (and it's probably worse now). Their high loan deny rate has to be over much more stupid and insignificant things than what really matters. I'm seeing stories of high FICO, high income, responsible people getting denied.
"All generous minds have a horror of what are commonly called 'Facts'. They are the brute beasts of the intellectual domain." -- Thomas Hobbes

Disclaimer: I am not a broker, dealer, investment advisor, physician, theologian or prophet.  I should not be considered as legally permitted to render such advice!

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