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LC is ending whole-loan note sales next week

Started by Peter, January 22, 2020, 11:00:00 PM

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Fred93

LC's support of the retail market is taking a big hit a few days from now.  This doesn't affect most of you directly, but it does affect me in a big way.

As most of you know, in the retail market, there are two kinds of notes sold by LC.  "fractional" notes represent a fraction of a loan, and "whole" notes represent an entire loan. 

LC has advised me that beginning 2/1/2020, LC will no longer offer whole notes.

In the beginning (2008), LC offered their product only in the form of notes, but as time went on and LC acquired more institutional customers, hedge funds, banks, etc, they evolved new forms of their product, where they sell the loans themselves (instead of an LC-issued note), or things called "certificates" or syndications.  Most institutional customers moved to these new forms of product.  Now the selling of notes is a small part of their business.

They haven't said what this will mean for the volume of product made available to the retail market.  I suspect that it means I will be forced to greatly reduce the size of my account, because I simply won't be able to keep the money invested.  I deposited my first money with LC on 1/24/2008.  Its been a nice run.

I suspect that there aren't very many of us whole-note-buyers any more, and it has become a burden to LC to support this niche containing few customers.

LC has suggested that I open an institutional account, and buy loans rather than notes.  This would require me to create an LLC, which would require me to pay LLC fees and taxes to the state, and file an additional tax return to both state and federal govt, and thus take on new accounting costs, and some new legal issues related to owning "loans" which I don't yet fully understand.  I've been intending to hire a lawyer to educate me about those regulatory issues and liabilities, but I haven't made that happen yet.



Rob L

Pretty much the first one to the party and the last one to leave. I admire your stamina!

JDII

I'm sorry to hear that your involvement with Lending Club may get more complicated.  From a selfish standpoint I hope you stay around.  Your observations on the company, and business as a whole, are always great appreciated.


jrl

I suspect the volume on the retail market will be kept just under the demand on the market. If you go around buying up 50% of every loan that hits the market, I suspect they'll issue more fractional notes to offset that. Like it is currently, there's always a few notes available, they just usually don't meet our criteria.

I suspect LC has some kind of criteria that looks at cash balances and investor behavior in order to try and create demand for these less-than-desirable (to a majority of the retail market) notes. IMO their algorithms appear to be garbage to us, but they're probably behaving as expected from LC.


rawraw

Having a portfolio like Fred is a life goal of mine.  #WholeLoanMoney

YoungFred

Fred,

Would you happen to know if you can still invest through the API as an institutional investor?


jrr6415sun

why don't you just buy a large portion of the fractional notes? Or is there a purchase limit


NEW LOANS:   | 804.eth 2.500 Ξ | remoraid.eth 0.299 Ξ | remoraid.eth 0.299 Ξ | ALL