P2P Lending / NFT Lending Forum

Thanks for sharing your experience. I like to peer into the thoughts, actions, and rationale of individuals who have deployed significant funds in this asset class. Your experience largely mirrors mine. I stopped reinvesting because the more conservative end of the spectrum where defaults are (theoretically) lower isn't providing me with a high enough return relative to other risk-free assets (such as FDIC-insured CDs). The problem for me with notes in the B and C grade is that I am generating far too many losses that I can't offset with any other capital gains (largely because I have stayed out of the stock market rally for the past 2-3 years, and don't plan to step in with CAPE numbers at all-time highs).

I think the culprit is three-fold: 1) Rising housing costs (mortgages and rent) 2) Rising health care costs and 3) Student debt.

Suggestion: "Sign-in Window."

Kind of reminds me of my wife's English classroom poster: "'Let's eat grandma!' vs 'Let's eat, grandma!' Commas: they save lives!'"

From the QZ article:

"Sacerdote's paper begins by showing that, for a variety of goods, US household consumption increased despite stagnant wages."

Well, consumption can indeed increase in light of stagnant wages if debt loads are increasing too. Isn't that what we are seeing? This QZ article seems to skirt the debt issue. If people are funding consumption and an increase in quality of living on increasing debt without a commensurate rise in wages, eventually we are in for a correction and it will end in tears. Defaults will happen, creditors will get stiffed (and P2P lenders), and a retrenchment will ensue.

I am an RN at a major hospital in Southern Utah, about 1 1/2 hour away from Vegas. I've seen enough anecdotal evidence among the extremely wide variety of patients I take care of to tell me that things are not good.  I live in one of the best economies in the nation, and everywhere I go I see young couples vastly overextending themselves. I remember going on a run the other day and talking with a guy who was in the process of buying a $500k house. This guy was a shuttle driver, probably making no more than $20/hr. The other "ah ha" moment I had which made me sour on the expansion was when I read Matt Levine's blurb about "puppy leasing."

https://forum.lendacademy.com/index.php?topic=3365.msg41099#msg88888888Quote"> from: lascott on June 11, 2017, 10:26:50 PM

I want to chime in on this post. I basically agree with dr. everett, Rob L, and Russ G, which is why I too have been letting my notes mature without reinvestment.I don't feel like I had unrealistic expectations about LC or this particular asset class. I do, however, think that LC made a mistake in the underwriting. But what really sort of soured is that now that the underperformance is visible, I don't think they are doing near enough in going in the other direction to help compensate for a patch of underperformance. I think they should have more forcefully raised interest rates to make up for the losses that the lenders incurred.

I always go back to the asymmetries of power: LC controls the rates via underwriting, but lenders and borrowers are only free to accept terms or not participate. There are probably bunches of loans that I would still buy on the platform, but I would want like a 2% to 3% increase in rates as a cushion given recent history.

As of 6/1/2017:

Adjusted Net Annualized Return:  7.30%
Weighted Average Interest Rate: 14.21%
Weighted Average Age of Portfolio: 26.3 mos
Number of Notes: 6415

Grade
A (12.9%) B (27.7%) C (23.0%)
D (17.3%) E (16.0%) F (2.5%) G (0.6%)

Term
36 (42.4%) 60 (57.6%)

vs All Accounts: 83.69
vs Similar Aged Accounts: 91.72
vs Similar Aged and WAIR Accounts: 90.17

I continue to draw down my account. Moving funds to FDIC-/NCUA-insured 3-5 year CDs.

Welcome to the forum, the more the merrier!

As of 5/3/2017:

Adjusted Net Annualized Return:  7.34%
Weighted Average Interest Rate: 14.21%
Weighted Average Age of Portfolio: 25.3 mos
Number of Notes: 6415

Grade
A (13.0%) B (27.8%) C (23.0%)
D (17.2%) E (15.9%) F (2.5%) G (0.6%)

Term
36 (42.7%) 60 (57.3%)

vs All Accounts: 84.59
vs Similar Aged Accounts: 92.22
vs Similar Aged and WAIR Accounts: 91.69

https://forum.lendacademy.com/index.php?topic=4306.msg40650#msg40650">Quote"> from: Fred93 on April 27, 2017, 06:50:48 AM

I read your work and found it very impressive, thanks for sharing! The extent of my programming is an intro to C++ and Java in my freshman year of university, so I wasn't able to follow everything in its entirety. But I want to ask you, how have your returns been doing and how many notes have you invested in? I am curious as to the answer to this because your model seems to suggest E and F notes plugged into your model have a higher predicted return rate. It seems that with the latest increase in defaults over the past year or so that the lower grade notes have been the worst performers. Obviously, the model can only go off historical data, and some of the recent deterioration and uptick in delinquencies may not have been apparent in the model data you trained your algorithm with. I'd be curious to hear if a more recent application of the data is showing that A/B or A/B/C notes are having a higher return?

As of 4/2/2017:

Adjusted Net Annualized Return:  7.41%
Weighted Average Interest Rate: 14.21%
Weighted Average Age of Portfolio: 24.3 mos
Number of Notes: 6415

Grade
A (13.1%) B (27.9%) C (23.1%)
D (17.1%) E (15.7%) F (2.4%) G (0.6%)

Term
36 (42.9%) 60 (57.1%)

vs All Accounts: 85.28
vs Similar Aged Accounts: 92.48
vs Similar Aged and WAIR Accounts: 93.27

Note: For a variety of reasons, I am withdrawing funds as notes mature and no longer reinvesting. Interest rates are not high enough to offset increased default and perceived risks.

https://forum.lendacademy.com/index.php?topic=4306.msg40282#msg88888888Quote"> from: rawraw on March 22, 2017, 07:47:15 PM

ANAR and adjusted account value have always been a little bit of a mystery, but this thread has helped me understand it better. The more I think about it, the more I think it makes sense, and I also think the formula is the truest approximation that can be given. I don't think there is any contradiction with the $5k initial deposit, an adjusted account value of approximately $5k, and an ANAR of .17%. Here is how I see it:

1) An investor makes a deposit into LC.
2) LC funds are used to select notes to invest in.
3) Each note has its own interest rate; the sum of all interest rates is the weighted average.
4) The actual return can only be known in retrospect and after all loans have either been paid off or charged off.
5) In the interim, one way (is it the best?) to approximate the return given the uncertainty of future payments is to sum all payments and adjustments as a percentage of principal and then annualize it.
6) The adjusted account value is an extrapolated amount based partly on your current payments and partly from loss assumptions from LC platform based on the trailing 9 months.

The ANAR and adjusted account value are kind of just projections, but they have some validity because it uses historical 9-month loss assumptions. But it is still fairly uncertain, and your exact loss rates will not match the LC platform as a whole. Mathematically, the fact that you had an initial deposit of $5k and an adjusted account value of roughly $5k doesn't mean that ANAR should be 0%.

Here is another way to think about it: take the sum of all your payments to-date, less adjustments (charge-offs and service fees), and apply some adjustment amount to take into account future charge-offs. This will give you a monthly return. Annualize it and then apply it to your note principal for the remaining life of your note amount and you will get some other number (i.e., adjusted account amount). This other number, when compounded at an .17% for the time period of your weighted note terms, just happens to be astonishingly close to your initial investment amount. This isn't evidence that the formula is overestimating anything at all or being misleading, it's just dealing with uncertainty in the way it was designed.

You actual, after-the-fact return will of course be different than what you see here, but this can't be known until all notes have run their full course, and at that point it's a very simple calculation. This is just an interim approximation. The easiest way to see how fickle the ANAR is and adjusted account amount is to tweak it yourself:

https://forum.lendacademy.com/proxy.php?request=http%3A%2F%2Fforum.lendacademy.com%2Findex.php%3Faction%3Ddlattach%3Btopic%3D4327.0%3Battach%3D1645%3Bimage&hash=0d2ef8ac87fbafcac454aae605f1ec6e" alt="" class="bbc_img" />

As of 3/1/2017

Adjusted Net Annualized Return:  7.48%
Weighted Average Interest Rate: 14.23%
Weighted Average Age of Portfolio: 23.3 mos
Number of Notes: 6382

Grade
A (13.2%) B (28.0%) C (23.1%)
D (17.1%) E (15.6%) F (2.5%) G (0.6%)

Term
36 (42.9%) 60 (57.1%)

vs All Accounts: 84.53
vs Similar Aged Accounts: 91.97
vs Similar Aged and WAIR Accounts: 90.51