So what's the lifecycle of these hardship loans?
They are listed as current now, but not making payments. Presumably at some point they're supposed to start paying--can they just keep on deferring? For how long?
And once they start finally being "late", do they go through the usual lifecycle for a late loan, starting with 15-30 days, and then 120 days? Or does the lateness "backdate" to the original deferred payment once they are late?
And so how long from today, where it's marked hardship, to when LC is going to mark one of these loans as charged off?
I doubt LC will give any guidance on this, since it is forward looking.
How would I approach it? Well I'd start with the base charge off rates for the loan attributes in 2008 time frame. This would give us a base rate of charge off by risk characteristics. From there you can make judgements on whether to adjust it up or down depending on the trends in the economy.
They won't just keep deferring, that is typically a frowned upon lending practice. But there are unique rules being applied now, so it may defer longer than we expect. I'd assume LC is making this up as they go. I work for a consumer lender and we are making it up as we go as well
8.3% of my investment is in Covid hardship status. The next couple months will be interesting.
Today they cancelled all my posted sales of hardship loans and they cannot be relisted for sale. The little "!" appears next to the loans in folio and it says it cannot be sold because it's in hardship status.
Sooooo....
We're stuck with them.
Good! For awhile they were allowing people to buy and sell hardship loans, but they never implemented reasonable user interface or API to allow buyers to see that they were buying hardship loans. They failed big time in their fiduciary duty to buyers!
So now that's fixed. Good.
I disagree. While the hardship status should definitely have been clearly defined and marked for buyers, there's no reason I should have to hold these notes indefinitely if someone else wants to buy them. I realize the discount would need to be significant, but I've been discounting notes to get out of LC for what seems like years, and now that dangling carrot just moved back a few more months.
I think you can agree that the buyer needs to be aware of the hardship status. That requires software work.
A few of my loans, which haven't been paid in three months, are now in "grace period".
I guess we know the answer to the lifecycle question...
Are they sell-able now?
I think they can only be sold once the hardship period ends. At that point he loan will either be in grace period, or current, depending on whether the scheduled payment was made.
"Neverlate" used to be an important factor. Is it still around? If so will a loan go through hardship, then grace and come out the other end still Neverlate?
Can't wait to see the NAR drop like a rock now that the first wave of hardship loans will be going through the formal delinquency accounting process.
Always found it odd that they were not counted as such in the first place.
Yup. I ended up buying a bunch of "hardship" loans by accident because they passed my "neverlate" filter, even though they hadn't actually been paid in a couple months.
If it makes you feel any better, the hardship equivalent loans we've been making at my employer are performing quite well. So hopefully it won't be an expensive mistake