Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: Fred93 on October 13, 2016, 11:00:00 PM
Post by: Fred93 on October 13, 2016, 11:00:00 PM
The short version
https://lcsiteupdates.zendesk.com/hc/en-us/articles/229520527
The long version
http://ir.lendingclub.com/Cache/36252226.pdf?IID=4213397&FID=36252226&O=3&OSID=9
https://lcsiteupdates.zendesk.com/hc/en-us/articles/229520527
The long version
http://ir.lendingclub.com/Cache/36252226.pdf?IID=4213397&FID=36252226&O=3&OSID=9
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: Peter on October 13, 2016, 11:00:00 PM
Post by: Peter on October 13, 2016, 11:00:00 PM
It's a big, imprecise-looking cut - gonna impact volume - but at least they're acting. Hopefully will optimize cut to better target ONLY the problem population, not cut off an entire arm because one finger gangrenous... In general, a step in the right direction, but just a start.
ETA: Unless it *was* a very precise cut and that much origination volume was actually affected/properly in scope for these changes.
ETA: Unless it *was* a very precise cut and that much origination volume was actually affected/properly in scope for these changes.
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TravelingPennies on October 13, 2016, 11:00:00 PM
Post by: TravelingPennies on October 13, 2016, 11:00:00 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: sean3.eth on October 13, 2016, 11:00:00 PM
Post by: sean3.eth on October 13, 2016, 11:00:00 PM
Am I reading this right?
Projected investor returns on G-grade loans have dropped 313 basis points between April and today...
Projected investor returns on G-grade loans have dropped 313 basis points between April and today...
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TravelingPennies on October 13, 2016, 11:00:00 PM
Post by: TravelingPennies on October 13, 2016, 11:00:00 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TravelingPennies on October 13, 2016, 11:00:00 PM
Post by: TravelingPennies on October 13, 2016, 11:00:00 PM
that's terrible! that's a huge shift.
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TravelingPennies on October 13, 2016, 11:00:00 PM
Post by: TravelingPennies on October 13, 2016, 11:00:00 PM
The 8-K that LC published today, contains a letter to investors, signed by LC's Chief Investment Officer Siddhartha Jajodin. I was pretty disappointed by this announcement. The letter is heavy on spin. Unfortunately, it doesn't contain anything that would reassure us that he actually knows what is going on.
It does make two serious admissions tho. At least that's progress.
He writes
Quote
It does make two serious admissions tho. At least that's progress.
He writes
Quote
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: SLCPaladin on October 14, 2016, 11:00:00 PM
Post by: SLCPaladin on October 14, 2016, 11:00:00 PM
Okay Fred93, I buy, and follow, every bit of your analysis. I think you're correct on all fronts, which is worrying for me as an investor. I expect another rate bump up in a couple of months, either due to the Fed increasing interest rates or higher-than-predicted delinquencies, possibly both.
But I suppose what I'm most interested in is what you plan to do? Are you on the sidelines, are you continuing to reinvest, or are you liquidating your portfolio? This question, of course, is open to anyone really. As for myself, I started reinvesting about 2 months ago. But I'm now thinking I need to hit the pause button and wait to see how much rot is in the system.
But I suppose what I'm most interested in is what you plan to do? Are you on the sidelines, are you continuing to reinvest, or are you liquidating your portfolio? This question, of course, is open to anyone really. As for myself, I started reinvesting about 2 months ago. But I'm now thinking I need to hit the pause button and wait to see how much rot is in the system.
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TravelingPennies on October 14, 2016, 11:00:00 PM
Post by: TravelingPennies on October 14, 2016, 11:00:00 PM
I hate to say this but the first time I ever saw Scott Sanborn speak in person was a few weeks ago at a conference and my impression was that he is in way over his head. Compared to the confidence that Laplanche used to exude, I don't think Sanborn has what it takes to even pretend that there is a bright future. I walked away thinking the company's best days were well behind it.
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TravelingPennies on October 14, 2016, 11:00:00 PM
Post by: TravelingPennies on October 14, 2016, 11:00:00 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TravelingPennies on October 14, 2016, 11:00:00 PM
Post by: TravelingPennies on October 14, 2016, 11:00:00 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: storm on October 14, 2016, 11:00:00 PM
Post by: storm on October 14, 2016, 11:00:00 PM
I will say I am impressed LC sent an e-mail to both my taxed and IRA account e-mail addresses pointing out that platform investors ought to read this. I hope they continue doing this as well as separating the shareholder information from the platform data. They could have just made another SEC filing and hope nobody noticed.
Thanks, as always, Fred93. I'm not much of a numbers guy (or letters for that matter), but your charts speak volumes.
Thanks, as always, Fred93. I'm not much of a numbers guy (or letters for that matter), but your charts speak volumes.
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: DLIFVOIP on October 14, 2016, 11:00:00 PM
Post by: DLIFVOIP on October 14, 2016, 11:00:00 PM
I know there are others posting in this topic that have been investing for years, so I am not the only one who has noticed the below. I started investing on LC in Dec 2009.
Everyone is correct and LC is finally starting to admit that defaults/charge offs are increasing across all grades. While this is not a good thing, back in the "good ole days" say 2010-2011 (maybe even thru 2012), it was not as big a deal as it is today, because the interest rates were so much higher than they are today.
2010 - A1 - 6.03%
2016 - A1 - 5.32% (and that is the new updated rate) That is a 12% decrease and again that is the updated 5.32%.
2011 - B1 - 9.91%
2016 - B1 - 8.24% (again this is the new updated rate) 17% decrease
I am not saying those were the rates for the entire year, but just examples. I used to make my bread and butter returns in the A and B grade loans because defaults were so low and interest rates were decent. I am also not saying other grades have not seen increases, but as someone who preferred high quality loans, I have seen my net return decrease from low 10% to low 8%.
I have also noticed the "quality" of borrower who received these lower interest rates over the years has deteriorated. So overall LC has decreased interest rates and lowered the quality of borrower who gets the lower rate loans. As investors we have been forced to take more risk for less return.
Everyone is correct and LC is finally starting to admit that defaults/charge offs are increasing across all grades. While this is not a good thing, back in the "good ole days" say 2010-2011 (maybe even thru 2012), it was not as big a deal as it is today, because the interest rates were so much higher than they are today.
2010 - A1 - 6.03%
2016 - A1 - 5.32% (and that is the new updated rate) That is a 12% decrease and again that is the updated 5.32%.
2011 - B1 - 9.91%
2016 - B1 - 8.24% (again this is the new updated rate) 17% decrease
I am not saying those were the rates for the entire year, but just examples. I used to make my bread and butter returns in the A and B grade loans because defaults were so low and interest rates were decent. I am also not saying other grades have not seen increases, but as someone who preferred high quality loans, I have seen my net return decrease from low 10% to low 8%.
I have also noticed the "quality" of borrower who received these lower interest rates over the years has deteriorated. So overall LC has decreased interest rates and lowered the quality of borrower who gets the lower rate loans. As investors we have been forced to take more risk for less return.
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: rawraw on October 14, 2016, 11:00:00 PM
Post by: rawraw on October 14, 2016, 11:00:00 PM
Fred93, I think you are asking the right questions but may be making a simple mistake. You are right to compare LC to the industry, but unfortunately those industry data sets are not vintages. I'm sure you understand the difference, so not so sure why you are alarmed they are diverging. The vintages will show weakness way before an aggregate level will show weakness.
Also, not so sure if lower grade LC notes are comparable to the industry metrics you are choosing. The subprime ABS market is experiencing increases in delinquencies. Surely LC falls in between the two, with the high grades being closer to subprime than bank credit IMO.
And like I've posted about ad nasuem, consumer credit can't get much better. These things go in cycles and everything isn't always the underwriters fault. I follow these markets pretty closely given my job and there is a lot of concern about near-term trends in consumer credit, especially low FICO. Which seems consistent with LC
Also, not so sure if lower grade LC notes are comparable to the industry metrics you are choosing. The subprime ABS market is experiencing increases in delinquencies. Surely LC falls in between the two, with the high grades being closer to subprime than bank credit IMO.
And like I've posted about ad nasuem, consumer credit can't get much better. These things go in cycles and everything isn't always the underwriters fault. I follow these markets pretty closely given my job and there is a lot of concern about near-term trends in consumer credit, especially low FICO. Which seems consistent with LC
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TravelingPennies on October 14, 2016, 11:00:00 PM
Post by: TravelingPennies on October 14, 2016, 11:00:00 PM
Quote
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: Fred93 on October 14, 2016, 11:00:00 PM
Post by: Fred93 on October 14, 2016, 11:00:00 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: rawraw on October 14, 2016, 11:00:00 PM
Post by: rawraw on October 14, 2016, 11:00:00 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TravelingPennies on October 14, 2016, 11:00:00 PM
Post by: TravelingPennies on October 14, 2016, 11:00:00 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: jz451 on October 14, 2016, 11:00:00 PM
Post by: jz451 on October 14, 2016, 11:00:00 PM
I wouldn't be too worried about looking at that chart because you can see that currently the curve is on the bottom end where the slope is not as steep as the big spikes where it shows a recession has occured.
from: Fred93 on October 15, 2016, 08:47:47 PM
from: Fred93 on October 15, 2016, 08:47:47 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TravelingPennies on October 14, 2016, 11:00:00 PM
Post by: TravelingPennies on October 14, 2016, 11:00:00 PM
C&I is up because of weakness in energy lending, such as oil, gas, coal.
Example of weakness in abs market.
http://www.autoremarketing.com/subprime/sp-global-ratings-spots-more-abs-deterioration
Sent from my SAMSUNG-SM-G935A using Tapatalk
Example of weakness in abs market.
http://www.autoremarketing.com/subprime/sp-global-ratings-spots-more-abs-deterioration
Sent from my SAMSUNG-SM-G935A using Tapatalk
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TravelingPennies on October 14, 2016, 11:00:00 PM
Post by: TravelingPennies on October 14, 2016, 11:00:00 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TravelingPennies on October 14, 2016, 11:00:00 PM
Post by: TravelingPennies on October 14, 2016, 11:00:00 PM
I am finding more articles on growing subprime auto delinquency, such as
http://www.bloomberg.com/news/articles/2016-10-11/more-americans-falling-behind-on-car-loan-payments-s-p-says
...
Quote
http://www.bloomberg.com/news/articles/2016-10-11/more-americans-falling-behind-on-car-loan-payments-s-p-says
...
Quote
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TravelingPennies on October 15, 2016, 11:00:00 PM
Post by: TravelingPennies on October 15, 2016, 11:00:00 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: Peter on October 15, 2016, 11:00:00 PM
Post by: Peter on October 15, 2016, 11:00:00 PM
think you're looking for a macro trend that doesn't exist / think this is still localized to p2p/mpl... peeriq.com keeps lists of securitizations.
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TravelingPennies on October 15, 2016, 11:00:00 PM
Post by: TravelingPennies on October 15, 2016, 11:00:00 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TravelingPennies on October 15, 2016, 11:00:00 PM
Post by: TravelingPennies on October 15, 2016, 11:00:00 PM
In my search for the answers to life's persistent questions (ie whether the rise in delinquency at LC is localized to P2P or is broader), I've been searching for statistics for non-P2P loans which show recent degradation vs time. Hard to find, as most credit statistics show pretty steady improvement over past several years. Well, I found some today. S&P has a set of consumer credit default indeces. (These are default rather than delinquency, but I'll take what I can get.)
These do show an uptick in the last few months. Not big, but it is consistent direction over last 3 months. Note that these indeces are monthly, and have been updated thru August, whereas the Fed stats I showed earlier are quarterly, and have only been updated thru June. So maybe these upticks are simply not visible yet in the Fed data, but will be soon.
These upticks are small in size, much smaller than the move up in LC delinquencies. I don't have an explanation for that. In fact, one could argue that they are about the same size as ordinary ripples that have occurred in the past without signalling a trend.
This doesn't settle anything of course. Its just more data. All the theories are still possible.
These do show an uptick in the last few months. Not big, but it is consistent direction over last 3 months. Note that these indeces are monthly, and have been updated thru August, whereas the Fed stats I showed earlier are quarterly, and have only been updated thru June. So maybe these upticks are simply not visible yet in the Fed data, but will be soon.
These upticks are small in size, much smaller than the move up in LC delinquencies. I don't have an explanation for that. In fact, one could argue that they are about the same size as ordinary ripples that have occurred in the past without signalling a trend.
This doesn't settle anything of course. Its just more data. All the theories are still possible.
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TravelingPennies on October 15, 2016, 11:00:00 PM
Post by: TravelingPennies on October 15, 2016, 11:00:00 PM
I'm not saying you won't see trickle-up effect of fico inflation into other areas (any company, whether credit card, installment loan poachers (otherp2p/disc/gs/etc), or mortgage providers will become to some degree infected by the fico inflation, as this population moves around the financial ecosystem with their overly inflated ficos - but i do think it originates (pardon the pun) w/p2p originators pushing CC debt into installment lines... if you find a big macro trend, you can then argue for backwards correlation, but i don't think that's what you're gonna find... think we're at critical saturation point where there are enough "fico zombies" w/inflated scores (due consolidation into installment lines/multiple installment lines - where else can you get 5 digits of cash into your chking account?) that macro trends will be micro-driven, and not the other way around... for now...
Sub-prime auto I kinda toss out, btw - Jamie Dimon called that bubble, in public, like six months ago now - expect major deterioration.
eta: anyway, i'm busy getting myself on some kind of watchlist for reading wikileaks... so my mind's not really in the p2p discussion...
Sub-prime auto I kinda toss out, btw - Jamie Dimon called that bubble, in public, like six months ago now - expect major deterioration.
eta: anyway, i'm busy getting myself on some kind of watchlist for reading wikileaks... so my mind's not really in the p2p discussion...
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TravelingPennies on October 15, 2016, 11:00:00 PM
Post by: TravelingPennies on October 15, 2016, 11:00:00 PM
Sean Murray of Debanked.com had a reaction to LC's announcement which was similar in its skepticism to my reaction. I think I may start checking his blog more often. (I believe he's a member here, under a different name.)
http://debanked.com/2016/10/for-lending-club-aint-nothing-but-a-ef-and-g-thang/
Quote
http://debanked.com/2016/10/for-lending-club-aint-nothing-but-a-ef-and-g-thang/
Quote
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TravelingPennies on October 16, 2016, 11:00:00 PM
Post by: TravelingPennies on October 16, 2016, 11:00:00 PM
How can there be a bubble in auto? Are you suggesting car prices are too high and will fall in the future?
You want to toss out Subprime, but a large percentage of these defaults on LC are Subprime. They start marginally above the line in the sand, but are still impacted by similar things. Indirect auto will not be a risk because of a bubble (maybe you can make this claim on used, but bubble is a bit much) . The collateral is not speculated on, but the borrowers seem to be experiencing heightened levels of stress. Who knows why, maybe it's energy, ag or something else. Both are impacted by the borrowers willingness or ability to repay. Collateral has little to do with it.
Sent from my SAMSUNG-SM-G935A using Tapatalk
You want to toss out Subprime, but a large percentage of these defaults on LC are Subprime. They start marginally above the line in the sand, but are still impacted by similar things. Indirect auto will not be a risk because of a bubble (maybe you can make this claim on used, but bubble is a bit much) . The collateral is not speculated on, but the borrowers seem to be experiencing heightened levels of stress. Who knows why, maybe it's energy, ag or something else. Both are impacted by the borrowers willingness or ability to repay. Collateral has little to do with it.
Sent from my SAMSUNG-SM-G935A using Tapatalk
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: Lovinglifestyle on October 16, 2016, 11:00:00 PM
Post by: Lovinglifestyle on October 16, 2016, 11:00:00 PM
I'm thinking the rise in health insurance premiums is one of the stressors for borrowers. That is enough to throw off the ability to pay loans for some people. But it doesn't explain the May 2016 effect.
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: newstreet on October 16, 2016, 11:00:00 PM
Post by: newstreet on October 16, 2016, 11:00:00 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: LonghornSF on October 16, 2016, 11:00:00 PM
Post by: LonghornSF on October 16, 2016, 11:00:00 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: Rob L on October 16, 2016, 11:00:00 PM
Post by: Rob L on October 16, 2016, 11:00:00 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: lascott on October 18, 2016, 11:00:00 PM
Post by: lascott on October 18, 2016, 11:00:00 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TheLittleDuke on October 18, 2016, 11:00:00 PM
Post by: TheLittleDuke on October 18, 2016, 11:00:00 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TravelingPennies on October 18, 2016, 11:00:00 PM
Post by: TravelingPennies on October 18, 2016, 11:00:00 PM
Couldn't help but notice the recent drop in A3, A4 and A5 interest rates in lascott's table above. (Maybe because they're red). 
Were these in LC speak "pockets of over performance"??
Or possibly a "Marcus" effect? I know it's a real stretch, but my theory is that Marcus will primarily target "A" grade borrowers.
Were these in LC speak "pockets of over performance"??
Or possibly a "Marcus" effect? I know it's a real stretch, but my theory is that Marcus will primarily target "A" grade borrowers.
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: AnilG on October 18, 2016, 11:00:00 PM
Post by: AnilG on October 18, 2016, 11:00:00 PM
Accounts are associated with SSN. The IRS tax information filed by Prosper will still be associated with same SSN. I doubt you can sell usernames/passwords to whole portfolio to achieve liquidity. If you want more liquidity, this investment is not for you. One component of higher return with this investment is illiquidity premium that you receive as a compensation in lieu of not able to sell your investments readily. Once liquidity rises, the illiquidity premium will go away, i.e. lower returns.
from: TheLittleDuke on October 19, 2016, 02:18:45 PM
from: TheLittleDuke on October 19, 2016, 02:18:45 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: fliphusker on October 18, 2016, 11:00:00 PM
Post by: fliphusker on October 18, 2016, 11:00:00 PM
Fraud is a mighty strong word. Why would LC pay anything LP related?
Q2 was not as bad as I expected with my limited knowledge. The question will be how much under that $70M loss will Q3 be? I am not worried one bit about LCs cash reserves, not for a few years at least.
from: broad40 on October 17, 2016, 12:14:23 PM
Q2 was not as bad as I expected with my limited knowledge. The question will be how much under that $70M loss will Q3 be? I am not worried one bit about LCs cash reserves, not for a few years at least.
from: broad40 on October 17, 2016, 12:14:23 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: TravelingPennies on October 19, 2016, 11:00:00 PM
Post by: TravelingPennies on October 19, 2016, 11:00:00 PM
Create LLC's with their own EIN's and then sell the company off ;-)
from: AnilG on October 19, 2016, 04:23:13 PM
from: AnilG on October 19, 2016, 04:23:13 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: rj2 on October 22, 2016, 11:00:00 PM
Post by: rj2 on October 22, 2016, 11:00:00 PM
I think what's driving this is fraud. The grifters have figured out how to get a loan from LC and they are binging.
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: Fred on October 24, 2016, 11:00:00 PM
Post by: Fred on October 24, 2016, 11:00:00 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: Amusant42 on October 24, 2016, 11:00:00 PM
Post by: Amusant42 on October 24, 2016, 11:00:00 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: Fred93 on October 24, 2016, 11:00:00 PM
Post by: Fred93 on October 24, 2016, 11:00:00 PM
Title: LC raises rates 10/2016 and updates loss forecast #s
Post by: RT45 on October 25, 2016, 11:00:00 PM
Post by: RT45 on October 25, 2016, 11:00:00 PM
Quote