Title: LC lowers rates gain
Post by: DLIFVOIP on February 03, 2015, 11:00:00 PM
Post by: DLIFVOIP on February 03, 2015, 11:00:00 PM
I just noticed at the 4pm cst drop that rates have been lowered again. I believe that makes 3 times in a 12 month period (maybe 18 months).
Making hard to maintain returns when reinvestment is at an average lower rate.
Just a general thought.
Making hard to maintain returns when reinvestment is at an average lower rate.
Just a general thought.
Title: LC lowers rates gain
Post by: kbenson99 on February 03, 2015, 11:00:00 PM
Post by: kbenson99 on February 03, 2015, 11:00:00 PM
Rates for D grades were raised slightly. F and G grades stayed the same. All other grades were lowered.
http://kb.lendingclub.com/siteupdates/articles/Site_Updates/Updates-to-Interest-Rates-and-Expected-Charge-Off-Rates-Effective-Feb-4-2015/?l=en_US&fs=RelatedArticle
Current: https://www.lendingclub.com/public/rates-and-fees.action
Prior to today: https://web.archive.org/web/20141231060251/https://www.lendingclub.com/public/rates-and-fees.action
http://kb.lendingclub.com/siteupdates/articles/Site_Updates/Updates-to-Interest-Rates-and-Expected-Charge-Off-Rates-Effective-Feb-4-2015/?l=en_US&fs=RelatedArticle
Current: https://www.lendingclub.com/public/rates-and-fees.action
Prior to today: https://web.archive.org/web/20141231060251/https://www.lendingclub.com/public/rates-and-fees.action
Title: LC lowers rates gain
Post by: edward on February 03, 2015, 11:00:00 PM
Post by: edward on February 03, 2015, 11:00:00 PM
Interest rates down or stable, and charge off rates up across the board. Yea, us. 
Title: LC lowers rates gain
Post by: RazzleDazzle on February 03, 2015, 11:00:00 PM
Post by: RazzleDazzle on February 03, 2015, 11:00:00 PM
To be expected though - regression. Too much demand (investors), not enough supply (borrowers).
Title: LC lowers rates gain
Post by: lascott on February 03, 2015, 11:00:00 PM
Post by: lascott on February 03, 2015, 11:00:00 PM
Title: LC lowers rates gain
Post by: TravelingPennies on February 03, 2015, 11:00:00 PM
Post by: TravelingPennies on February 03, 2015, 11:00:00 PM
Here's the rates from 12/31/14 and today. Looks like you may have cut-n-paste incorrectly a few times.
Title: LC lowers rates gain
Post by: ksb1234 on February 03, 2015, 11:00:00 PM
Post by: ksb1234 on February 03, 2015, 11:00:00 PM
Origination fees for 60 month A grade loans up. 36 month A3 up as well.
More for them less for us. Isn't dealing with a public company great?
More for them less for us. Isn't dealing with a public company great?
Title: LC lowers rates gain
Post by: rawraw on February 03, 2015, 11:00:00 PM
Post by: rawraw on February 03, 2015, 11:00:00 PM
Title: LC lowers rates gain
Post by: TravelingPennies on February 03, 2015, 11:00:00 PM
Post by: TravelingPennies on February 03, 2015, 11:00:00 PM
Title: LC lowers rates gain
Post by: turing on February 04, 2015, 11:00:00 PM
Post by: turing on February 04, 2015, 11:00:00 PM
If every single note is being funded then this definitely makes sense. There is too much demand and not enough supply.
Sure it would be great to keep on making the same return, but LC needs to adjust to market conditions. If I were in their shoes I would do the same thing.
Sure it would be great to keep on making the same return, but LC needs to adjust to market conditions. If I were in their shoes I would do the same thing.
Title: LC lowers rates gain
Post by: LendingAlpha.com on February 04, 2015, 11:00:00 PM
Post by: LendingAlpha.com on February 04, 2015, 11:00:00 PM
Here's an analysis of the interest rate changes and its implications:
More commentary here:
https://lendingalpha.com/blog/2015-02-05-lending-club-interest-rate-changes/
- Lower rates across low and medium risk loans (A/B/C). The change had the largest relative impact on A3-B5 loans.
- Higher rates for D loans
- Lower rates for E loans, but impact relative to net return is lower.
- Same rates for F&G loans
More commentary here:
https://lendingalpha.com/blog/2015-02-05-lending-club-interest-rate-changes/
Title: LC lowers rates gain
Post by: Unfolder on February 04, 2015, 11:00:00 PM
Post by: Unfolder on February 04, 2015, 11:00:00 PM
As long as my precious G crap notes stay the same I'm happy. 
Does lowering yield put more money in LC's pocket directly? Or does it just potentially get them more borrowers via more competitive rates?
Also I agree with the sentiment that investors are fighting like dogs over too few borrowers, they should introduce GR or Greek grade notes with 50% interest and desperately high risk, I'd buy em. Though I guess that would fly in the face of "LC is not a payday loan company." Though why it's striving to not be a payday loan company is a mystery to me, payday loans are wildly profitable, which is why there are so many in Georgia. I seriously doubt any of the sharks investing in LC notes are doing it out of the goodness of their hearts...
Does lowering yield put more money in LC's pocket directly? Or does it just potentially get them more borrowers via more competitive rates?
Also I agree with the sentiment that investors are fighting like dogs over too few borrowers, they should introduce GR or Greek grade notes with 50% interest and desperately high risk, I'd buy em. Though I guess that would fly in the face of "LC is not a payday loan company." Though why it's striving to not be a payday loan company is a mystery to me, payday loans are wildly profitable, which is why there are so many in Georgia. I seriously doubt any of the sharks investing in LC notes are doing it out of the goodness of their hearts...
Title: LC lowers rates gain
Post by: TravelingPennies on February 04, 2015, 11:00:00 PM
Post by: TravelingPennies on February 04, 2015, 11:00:00 PM
LC benefits from lower rates because there will be more borrower interest. 97% of their revenue today comes from origination fees and the rest from payment servicing fees. They're lowering rates as their risk models show that default rates are declining. They can also do this because they have an imbalance of investors-to-borrower ratio. Effectively, LC is adjusting their interest rates so that investors are experiencing the same modeled net returns while stimulating borrower demand. They're not necessarily taking away from one place to another. This is a results of the consumer credit market is improving, which you can expect the contrary occurs.
Title: LC lowers rates gain
Post by: Fred93 on February 04, 2015, 11:00:00 PM
Post by: Fred93 on February 04, 2015, 11:00:00 PM
Title: LC lowers rates gain
Post by: Randawl on February 04, 2015, 11:00:00 PM
Post by: Randawl on February 04, 2015, 11:00:00 PM
Quote"> from: LendingAlpha.com
Title: LC lowers rates gain
Post by: Unfolder on February 04, 2015, 11:00:00 PM
Post by: Unfolder on February 04, 2015, 11:00:00 PM
Title: LC lowers rates gain
Post by: bobeubanks on February 05, 2015, 11:00:00 PM
Post by: bobeubanks on February 05, 2015, 11:00:00 PM
Title: LC lowers rates gain
Post by: RazzleDazzle on February 05, 2015, 11:00:00 PM
Post by: RazzleDazzle on February 05, 2015, 11:00:00 PM
Yep. Usury laws and default rates rise proportionally.
Title: LC lowers rates gain
Post by: Fred on February 05, 2015, 11:00:00 PM
Post by: Fred on February 05, 2015, 11:00:00 PM
Title: LC lowers rates gain
Post by: Fred93 on February 05, 2015, 11:00:00 PM
Post by: Fred93 on February 05, 2015, 11:00:00 PM
Title: LC lowers rates gain
Post by: rawraw on February 05, 2015, 11:00:00 PM
Post by: rawraw on February 05, 2015, 11:00:00 PM
Unfolder is the reason why I've long said this will end up getting regulated away from retail investors. People like that
Title: LC lowers rates gain
Post by: turing on February 05, 2015, 11:00:00 PM
Post by: turing on February 05, 2015, 11:00:00 PM
Title: LC lowers rates gain
Post by: lascott on February 05, 2015, 11:00:00 PM
Post by: lascott on February 05, 2015, 11:00:00 PM
Title: LC lowers rates gain
Post by: DLIFVOIP on February 05, 2015, 11:00:00 PM
Post by: DLIFVOIP on February 05, 2015, 11:00:00 PM
Title: LC lowers rates gain
Post by: avid investor on February 05, 2015, 11:00:00 PM
Post by: avid investor on February 05, 2015, 11:00:00 PM
I get the complaint about lower rates and lower yields for the retail investor. Still, LC is in a sweet spot for me between low-return CD's (don't have any) and my wild ride in equities (which lost 5-digits in January and already made back 5-digits in February). At least LC is not that volatile and still produces a respectable return.
Title: LC lowers rates gain
Post by: TravelingPennies on February 05, 2015, 11:00:00 PM
Post by: TravelingPennies on February 05, 2015, 11:00:00 PM
Circle your fear is not unfounded.
After all in the 80's thirty year treasury bills were paying 20+%...
After all in the 80's thirty year treasury bills were paying 20+%...
Title: LC lowers rates gain
Post by: TravelingPennies on February 05, 2015, 11:00:00 PM
Post by: TravelingPennies on February 05, 2015, 11:00:00 PM
Title: LC lowers rates gain
Post by: TravelingPennies on February 05, 2015, 11:00:00 PM
Post by: TravelingPennies on February 05, 2015, 11:00:00 PM
Title: LC lowers rates gain
Post by: TravelingPennies on February 05, 2015, 11:00:00 PM
Post by: TravelingPennies on February 05, 2015, 11:00:00 PM
Title: LC lowers rates gain
Post by: LendingAlpha.com on February 05, 2015, 11:00:00 PM
Post by: LendingAlpha.com on February 05, 2015, 11:00:00 PM
I stand correctly on the lower rates and higher default rates (as modeled by LC). Upon further review of the new interest rates and LC's blog posts of expected charge off rates, it's clear that the move was an investor returns squeeze. Granted, they can do this since they continue to have an imbalance of investor-to-borrower ratio.
https://lendingalpha.com/blog/2015-02-06-lending-clubs-investor-returns-squeeze/
http://ir.lendingclub.com/Cache/c27458795.html
http://kb.lendingclub.com/siteupdates/articles/Site_Updates/Updates-to-Interest-Rates-and-Expected-Charge-Off-Rates-Effective-Feb-4-2015
The biggest relative impact was for the A and B grade investors. The weighted-net return is now at 7.10%, down from 7.46% according to LC's models. If I have to guess, the trend of squeezing returns from investors will continue until they have a balance between investor vs. borrower dollars. In addition, changing market interest rates (Fed) and default rates (economic change) will also adjust the loan interest rates in the future. For now, changes due to the investor squeeze is still on the table, especially given how quickly they made the change since the last time (October 29, 2014).
Also a comment on this lose-lose situation for the investors: The attractiveness of this investment vehicle is confirmed by the high investor imbalance relative to borrowers. This is because investors continue to acknowledge the high returns relative to the risks (and free diversification of risk). Though the future expected net returns are lower, it is still an attractive investment vehicle for investors.
https://lendingalpha.com/blog/2015-02-06-lending-clubs-investor-returns-squeeze/
http://ir.lendingclub.com/Cache/c27458795.html
http://kb.lendingclub.com/siteupdates/articles/Site_Updates/Updates-to-Interest-Rates-and-Expected-Charge-Off-Rates-Effective-Feb-4-2015
The biggest relative impact was for the A and B grade investors. The weighted-net return is now at 7.10%, down from 7.46% according to LC's models. If I have to guess, the trend of squeezing returns from investors will continue until they have a balance between investor vs. borrower dollars. In addition, changing market interest rates (Fed) and default rates (economic change) will also adjust the loan interest rates in the future. For now, changes due to the investor squeeze is still on the table, especially given how quickly they made the change since the last time (October 29, 2014).
Also a comment on this lose-lose situation for the investors: The attractiveness of this investment vehicle is confirmed by the high investor imbalance relative to borrowers. This is because investors continue to acknowledge the high returns relative to the risks (and free diversification of risk). Though the future expected net returns are lower, it is still an attractive investment vehicle for investors.
Title: LC lowers rates gain
Post by: BBingo on February 05, 2015, 11:00:00 PM
Post by: BBingo on February 05, 2015, 11:00:00 PM
I wonder if the lower rates on new loans will spur more purchases of older notes on foliofn that are performing at the higher interest rates of old.
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Title: LC lowers rates gain
Post by: LendingAlpha.com on February 06, 2015, 11:00:00 PM
Post by: LendingAlpha.com on February 06, 2015, 11:00:00 PM
There probably won't necessarily be more purchases, but prices are supposed to be higher in the secondary market for pre-February 4 notes.
Title: LC lowers rates gain
Post by: Fred93 on February 06, 2015, 11:00:00 PM
Post by: Fred93 on February 06, 2015, 11:00:00 PM
Title: LC lowers rates gain
Post by: Fee on February 06, 2015, 11:00:00 PM
Post by: Fee on February 06, 2015, 11:00:00 PM
Title: LC lowers rates gain
Post by: bobeubanks on February 06, 2015, 11:00:00 PM
Post by: bobeubanks on February 06, 2015, 11:00:00 PM
Title: LC lowers rates gain
Post by: TravelingPennies on February 08, 2015, 11:00:00 PM
Post by: TravelingPennies on February 08, 2015, 11:00:00 PM
Title: LC lowers rates gain
Post by: TravelingPennies on February 08, 2015, 11:00:00 PM
Post by: TravelingPennies on February 08, 2015, 11:00:00 PM
Title: LC lowers rates gain
Post by: RazzleDazzle on February 08, 2015, 11:00:00 PM
Post by: RazzleDazzle on February 08, 2015, 11:00:00 PM
It would be interesting to see if previous data supports this. If the interest rates have been coming down per this thread then did the secondary market demonstrate the "bond like" price change in prior quarters?
Title: LC lowers rates gain
Post by: kya on February 08, 2015, 11:00:00 PM
Post by: kya on February 08, 2015, 11:00:00 PM
wsj today reports a group of small banks will be making loans on lc ...wonder how this further squeezes the little guy?
Title: LC lowers rates gain
Post by: TravelingPennies on February 08, 2015, 11:00:00 PM
Post by: TravelingPennies on February 08, 2015, 11:00:00 PM
The new partnership means more loans in the marketplace. Though Alliance Partners is also investing in the loans, which could theoretically compete against the "small guys", banks have typically been only interested in lower risk loans (grades A/B), which usually haven't been the popular loan grades for the "small guys." Therefore, if true, there will be more higher risk loans (grades C-G) for the "small guys" to invest, which is a good thing in my book.