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Author Topic: Loan status migration / adjustment numbers - weird

r

rj2

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Loan status migration / adjustment numbers - weird
OP: December 09, 2017, 12:00:00 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?

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Loan status migration / adjustment numbers - weird
#1: December 09, 2017, 12:00:00 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.
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O
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Loan status migration / adjustment numbers - weird
#2: December 10, 2017, 12:00:00 AM
Apparently not all notes move from late through default to charged off. Some skip default and go from late to charged off.
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Loan status migration / adjustment numbers - weird
#3: December 10, 2017, 12:00:00 AM
Quote
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j
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Loan status migration / adjustment numbers - weird
#4: December 18, 2017, 12:00:00 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.
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