Steadfast FinancesShutting Down My Lending Club Investments

Shutting Down My Lending Club Investments

Filed in Banking , Investing 101 , Peer to Peer Lending 182 comments

In a decision I consider nearly as bad as the “New Coke” experience, Lending Club has decided to limit the questions an investor can ask potential borrowers. The resulting policy only allows investors to ask a limited series of pre-approved questions.

For me, this is unacceptable.

The primary reason for the change in transparency was to protect the borrower’s identity. Via Lending Club’s blog

Lending Club investors have the ability to ask questions of potential borrowers before committing investments into their loans. This ability has raised concerns in terms of protecting the privacy and identity of both borrowers and investors. These concerns led us to adjust our Q&A mechanism for the benefit of both borrowers and investors.

Starting tomorrow, investors will only be able to ask questions from a predefined set that was created based on the most frequently asked questions logs over the last 2 years and reviewed and edited by our compliance team. As an investor, feel free to submit additional questions that you would like to see added to list to feedback@lendingclub.com.

I agree 110% that a borrower’s identity needs to be protected. No problem. I’ll bend over backwards to comply.

The Problem

What I vehemently disagree with is that Lending Club has positioned themselves so that my questions have to be pre-approved even though I’m investing my money. Moreover, I only get to select from a series of pre-approved frequently asked questions that were filtered through Lending Club’s compliance department.

Bottom line: if Lending Club doesn’t “approve” of my question, sucks to be me.

This isn’t a quarterly earnings analyst call with Goldman Sachs or General Motors, nor is it a politician’s press conference, where softball questions are predefined and the deck is stacked to make the party of interest look their best. It is a — it was a — place where a borrower could apply for a loan, investors could review the borrower’s personal finances, and ask any question they wanted (without compromising either party’s identity) to make a decision on the borrower’s creditworthiness as well as make a decision on the probability the borrower would repay the loan plus interest.

If that meant asking the borrower a few tough questions, calling BS on the the borrower’s cream puff answer(s), or he/she decided to tap dance around the question without answering it, we investors apparently no longer have a say in the matter. We just take what we’re given, and told to take it or leave it.

In my opinion, this greatly compromises an investor’s ability to outperform the benchmark index and raises the rate of default.

I’m Out

I had high hopes for Lending Club as they were the most progressive thing that happened in finance for many, many years. I’ve also been one of their most outspoken supporters over the last 2 years by posting my returns and assisting more new investors find their way than any other blogger I know by organizing a 100+ person investment club.

However, based on the new policy of reduced investor transparency, I will not be investing new funds, nor will I be reinvesting funds that are repaid.

I will also be closing down the Lending Club investment club of 100+ members, and the new P2P Lending Investor blog & forum is dead in the water. Apologies to those that found value in the club, but I don’t like anyone telling me what I can or can’t ask when it comes to my money and my investments.

In hopes of remaining neutral, I will not advise anyone to follow along with my decision, but instead of writing a dozen blog posts trying to persuade Lending Club to reverse their decision, it’s far more simple to vote with your money.

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Posted by CJ   @   22 April 2011 182 comments
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182 Comments

Comments
Apr 22, 2011
1:30 pm

Good for you. I agree wholeheartedly. The direction that P2P lending has taken over the last few years, especially from the point of view of lenders is nothing less than a disappointment. I have only 1 remaining loan with Prosper, and it’s taken years to unwind from their grasp. That loan will come due in July, and I will be escaping with a small positive return (no thanks to the early loans on Prosper!). Until P2P starts to become more lender-friendly, I don’t intend to jump back in. However, given the current low interest rate environment and the historically high ratio of lenders to borrowers, I don’t see that happening anytime soon.

Apr 22, 2011
1:34 pm

Matt, Sorry to see you go, but I understand your decision. Just one point I wanted to make sure your readers know. This was not a decision made by Lending Club. My understanding is that this was mandated on them by the WebBank, their loan underwriter. The same ability to ask questions has now gone from Prosper as well (they also use WebBank as their underwriter).

I hope one day in the future you will take another look at p2p lending.

Apr 22, 2011
3:22 pm
#3 Hank :

Man, that sucks! I’m going to miss our investment club and your emails. Please keep in touch.

Apr 22, 2011
3:54 pm
#4 Archie :

Yeah this is AWFUL.

I’m ending deposits and reinvestments too. I’d encourage everyone else to do the same or at least send your feelings about this to support@lendingclub.com and feedback@lendingclub.com (and whoever else you have)

Its very easy for a scam artist to concoct nice answers to the pre-canned questions. I’d say 1/4 of the time I asked a question there was some deception in the answer. There are MANY scammers on LC. Many are rejected by pre-screening but quite a few make it through and are weeded out by lenders before getting funds.

Whats more, I believe this is in violation of the Prospectus and all the LC marketing material that used to be up. We’re no longer “asking questions” but clicking on a very short list of options. And this is in the name of “protecting” the lender? Please. It actually puts us at much more risk from scammers.

PS Whoever said this should take a long look in the mirror. “This was not a decision made by Lending Club.” This was ABSOLUTELY a decision by lendingclub. And the “underwriters” of their loans are us. The lenders.

Apr 22, 2011
4:27 pm
#5 vs :

Initially I though these predefined questions were meant to give some structure to the ‘common’ questions that everybody asks in slightly different ways.

My suggestion (who cares since nobody reads blog comments anyway) is that these predefined questions be REQUIRED as part of the lending application and additional questions be reviewed for compliance. Yeah, I know that’s hard and may not be necessary for the success of their program (in the same way people bought AAA CDO/CMOs without understanding the underlying loans before the credit crisis).

I just started this program and was looking forward to some sweet peer to peer action. I am however in agreement with you. I’m not sure if this is enough to keep me out of the program (I assume a certain level of scammery and expect this to be a non-correlated asset that produces 6-7% after ‘true defaults’ and ‘scams’) but it is definitely going to make me think about it.

I toed into the program five weeks ago with $1000 and 1/2 is deployed.

Apr 22, 2011
4:35 pm

@Archie, It was me who said, “This was not a decision made by Lending Club.” I have had a long hard look in the mirror and I stand by that statement. Lending Club’s business relies heavily on WebBank, who issue the loans to borrowers and then assign the loans to Lending Club. In fact, without WebBank, Lending Club cannot issue new loans. Lending Club has no banking license, it needs a third party bank to fund the loans.

Sure Lending Club could probably find a new bank but this would take time and require the issue of a new prospectus. So in reality if WebBank say they must make a change, then they have no choice (at least in the short term).

Apr 22, 2011
6:46 pm
#7 Archie :

Peter, again, this was entirely LendingClub’s decision. I have not seen a press release saying “Web Bank demanded this”.

Anyway if you’re fine with the new system, go ahead and use it. I have no doubt you will be scammed. These are entirely unsecured loans without even a name attached to them. Questions were the primary means for sniffing out scam artists.

Apr 22, 2011
6:56 pm
#8 Matt SF :

I don’t necessarily mind the return since I’m still doing double digits, but I’m leaving on more of a business ethics or personal ethics thing. As long as I don’t ask for borrower identity, I should have the ability to ask them what’s their favorite ice cream flavor if I want.

Plus, I based a lot of my due diligence is based on what is included in the Q&A section(much like a interviewer gets a “vibe” from the interviewee), so this REALLY hamstrings me.

Everyone has been asking how I outperformed the Lending Club index benchmark by so many basis points… and it just went poof.

Apr 22, 2011
7:22 pm
#9 Matt SF :

“This was not a decision made by Lending Club. My understanding is that this was mandated on them by the WebBank, their loan underwriter.”

If this is correct, that’s even scarier. The fact that a 3rd party entity (other than a governmental regulatory agency) could hypothetically direct Lending Club policy against their wishes is alarming to say the least.

Apr 22, 2011
7:23 pm
#10 Matt SF :

Thanks Hank. I’m not going anywhere but the Lending Club material will likely be few and far between for a while.

Apr 22, 2011
7:28 pm
#11 Stu :

I don’t get it. The borrowers are big boys and girls, can’t they be responsible for protecting their own identity? Lending Club should focus on educating borrowers privacy, not punishing investors. I strongly encourage everyone to email Lending Club, and let them know how outrageous this is.

Apr 22, 2011
7:34 pm
#12 Matt SF :

I wouldn’t go so far as to say it’s a scam b/c a vast majority of the loans pay off.

But just a few loans not paying off, regardless if it’s an identity thief, someone who simply wants to game the system with a quick bankruptcy after loading up on credit derived dollars, or just an unlucky fella who gets hit by a bus the day after getting his loan, will drastically affect our net annual return.

My biggest fear isn’t being scammed by this new development (although I can foresee how it will increase the probability) but that not allowing unique questions will allow weaker borrowers to get funded and hurt investor return.

As someone who has spent 1-2 hours on the platform every week for over 2 years, I can honestly say I weed out 9 out of 10 loans that pass my very conservative filters.

So limiting my ability to ask a unique question does nothing but hamstring me since the Q&A — even if I don’t ask it the question — does nothing but cut out 50% or more of my due diligence process.

And that’s a game I’m just not willing to play.

Apr 22, 2011
7:47 pm
#13 Matt SF :

Well said Stu. I think it’s a bit of a case of “Ivory Tower” syndrome, where those far removed from the trenches see things in an entirely different light than those who are getting shot at.

Didn’t work out too well for JFK & LBJ vs. Vietnam, and won’t work here either. I’ve dealt with this too many times to count in the corporate world, and on almost every occasion, time proved me right.

You want to fix a problem like this, rely on the people who have survived and thrived, not put them on a leash.

Apr 22, 2011
9:16 pm
#14 Matt SF :

Thanks VS.

My intent isn’t to spook anyone, but to question the logic of taking away an important due diligence tool away from investors like me. If it’s taken away, I have no choice but to walk.

Much of my investment strategy is based around the Q&A section, so painting guys like me in a corner, as well as the dozens of other investors who routinely ask unique questions and I include into my own due diligence, accomplishes nothing but taking an arrow out of the active investor’s quiver.

Apr 23, 2011
1:26 am
#15 Archie :

I think Matt hit the nail on the head. The world financial system nearly collapsed because lenders stopped asking questions — they funded shoddy “liar loans” backed by questionable properties, which inevitably defaulted.

Sounds a lot like lendingclub loans with non-verified income to me.

So WHY on earth would lendingclub want people to Stop Asking Questions? Haven’t we learned anything from the past few years?

Apr 23, 2011
4:54 am
#16 Dan B :

Although I disagree in principle with this move I think that all of you are exaggerating the effectiveness & importance of the now defunct question/answer format.
Let us not forget 3 important points.

1. Not every lender read the question/answers. I did when I first started out but both the questions & answers soon became tiring, redundant & time consuming. I stopped doing it about a year ago with no detrimental effects. I’m guessing that I can’t the only one with that experience.

2. The borrower could always ignore as many unpleasant or probing questions as he/she wanted & we would never know that any of these ignored questions had even been asked. If a borrower were to do that he’d lose that 1 potential investor per question ignored. In the grander scheme of how loans are funded, so what?

3. The borrower could lie or finesse the reply to questions without most (if not all) investors catching on to the deception. I know I could very easily do this, so I’m not going to assume others can’t. I know investors like to feel that they’re weeding out the scammers, but the reality is that, at best they’re just weeding out the stupid ones.

Apr 23, 2011
9:01 am

COMMENT FROM INVESTORJUNKIE.COM

I’m sorry you decided to go this route. IMHO the questions really don’t make that much of a different in the end result.. defaults.

While I did look at them, I really didn’t ask too many questions and I don’t think affects the default rate.

Keep mind many people invest without even reading the details!! They invest via automated methods.

The comments were much more subjective than objective in the decision making process. For me personally I like more the stats. I would like to see more of that info available and better filtering.

For LC investors you are more than welcome to visit my site to discuss investing in LC notes.

Do I think P2P investing is perfect? Definitely no, but I think you are making a bigger deal about this than it should be.

Apr 23, 2011
10:20 am
#18 Matt SF :

I’m obviously on the flip side of your comment.

As a general rule of human decency, investor liberties, and a multitude of other scenarios, I don’t like people taking away my ability to ask a question. I’m actually surprised you aren’t taking more of an issue with it considering this is a “nanny state” type of move.

Call it transparency reduction or call it punishment b/c some bonehead investor may have contacted a borrower when he/she is strictly forbidden to do so… I don’t know. I wasn’t at the meeting when the decision was made, but rest assured, I can let them know how I feel after it was made.

The irony here is that any competent internet user could find, at minimum, 1 out of every 4 loan applicants if they wanted with just the borrower’s employer name, location, and job title.

Lots of people these days have posted their personal information and career information on multiple websites to such detail that they can easily be found. (LinkedIn, Facebook, etc.)

So protecting identity this way seems more like a perception based joke by someone who has no idea what it’s like in the trenches than an efficacious measure of anonymity.

Furthermore, how dumb do the borrowers have to be to reveal their identity when they’re specifically told not to. If they do, that might be the best means of weeding out the bozos – if they can’t follow simple rules it’s probably not a good idea to loan them money in the first place.

But as far as investment strategy, the Q&A section is a key part of my due diligence and the ONLY means where we investors have any sort of input aside from not investing in the borrower.

Asking questions and estimating a probability of repayment from the quality of the answers to my questions — and the questions posed by ~12 other consistent question asking investors — was a big reason, in my opinion, I was able to beat the index during my run.

Now this feature is gone, I don’t have the same confidence in Lending Club to make a return that’s worth my time.

So back to MLPs and REITs I go.

Apr 23, 2011
11:00 am
#19 Matt SF :

Dan, I disagree on all points.

1) If you don’t read the Q&A, it’s analogous to not reading the fine print on a financial document. May not be necessary, but inadvisable to say the least. Lots of goodies in there that aren’t shown in the numbers… like real DTI vs. the DTI that Lending Club states (Hint: LC doesn’t include a mortgage payment in the DTI calculation).

2) I really don’t care what other investors are doing. First and foremost, I care about my return. If investors fail to ask the borrower a tough question where the borrower fails to answer it (for whatever reason), it’s their loss because they have (or had) the option to take part. Caveat Emptor!

3) That’s where experience and asking a unique question comes into play, as well as comparing what’s in the downloadable spreadsheet to their question compared to what they’ve included in their original application. I’ve actually caught one borrower in a lie b/c he/she placed one thing in his original application, but told me something different in the Q&A section. So to me, it’s importance is paramount, even if it catches 1 in 100.

You’re a very smart guy, so I have no doubt you could game the system if motivated to do so, which is why multiple layers of protection are put in place — identity checks, verified income (pay stubs, calling borrower’s HR department, etc.), verified USA bank accounts, are all critical.

So why strip away another layer of protection for investors when investors are the ones who fund their business model?

Apr 23, 2011
12:55 pm
#20 ts :

I agree. This is wrong and decreases the health of the consumer note capital market.

When investors buy bonds from businesses there are no “pre-approved” questions that they have to pick from when questioning the borrower (management of the borrowing company).

When investors buy stock from a company they again are allowed to work within a stated compliance framework and ask anything they’d like when questioning management.

I believe the consumer notes markets should clearly state a compliance framework, and then let investors and borrowers get to work performing their due diligence just the same as any of the other capital markets without being limited to “pre-approved” stock questions.

It makes for a more healthy system when investors are free to perform their due diligence when selecting borrowers.

Also, I think LC should require borrowers to write up a small paragraph up front of why they want a loan and how they are going to use it, since many of the metrics collected such as revolving debt balance seem to be proven wrong after questioning the borrower.

Apr 23, 2011
2:11 pm
#21 Dan B :

Clearly you & I have very different approaches to how we invest here & that’s fine. At the end of the day the only thing that really matters to me is “return rate” & avoiding defaults. Your approach has yielded very impressive numbers SO FAR, but as I’ve said to you before I strongly believe that in the long run my results & yours are going to be real close despite my 30 second analysis of each note & despite your preponderance of 5 year notes.

I was so looking forward to prove to you that effort does not always equal reward here & lots of time spent analyzing does not always equal better returns.

3 months or so ago your NAR was at 15+%, mine was at 9%. Today mine is at 10%, where is yours?

I was planning to revisit this conversation 6 months from now when my returns will be at 11% or so & yours would have DEFINITELY declined to a number that will no longer give me a nosebleed………. And then revisit this again a year from now when I suspect that the only difference in our respective return rates would be that you’ve spent 10 times the necessary time in analysis (in my opinion) & invested in predominantly 5 yr. loans as opposed to my predominantly 3 yr. ones & 30 second analysis.

I’m guessing that many of your supporters are scoffing or rolling on the ground laughing at what I’m saying here & I was so looking forward to rubbing their nose in it as well……..as time went by & reveal that I’m not as full of crap as I’m sounding right now.

But since you’ve decided to take yourself out of this jousting contest, we won’t be able to play out the above scenarios…….which denies me the opportunity to unhorse you. :)

Apr 23, 2011
3:24 pm
#22 Jay :

Matt and others – I’m entirely with Matt on this issue. Today, I’ve begun transferring repayments back to my bank account and I am closing my LC account after 3 years (as soon as the last note pays). I too am disappointed b/c I had plans to use LC in my overall investment portfolio to a large degree in the future. But, I cannot stand for this type of censorship when it’s my money.

Peter, regardless of whether its WebBank or LC’s issue, both of them have a financial interest if people are walking away – which is exactly what I encourage all who are as disgusted as I and Matt to do. I’ve explained my reasoning over at Peter’s blog and don’t want to become redundant in posting them here; suffice it to say it closely follows Matt’s reasoning.

Apr 23, 2011
8:00 pm
#23 Dan B :

I think that one was bored enough to examine my posting history here & at Peter’s sociallending.net you’ll find that I’ve been more of a critic of p2p policies than both Matt & Peter combined.

In this case though, I can’t see why this seems to be a such a big deal to some of you. I agree in principle with your position but it almost seems like you all are personally offended……….as if one of your basic human rights are being violated.

I understand that it’s no fun having someone tell you that you can no longer have it your way & that it feels good to yell & scream & stomp away…….but the only thing that would alarm me in this entire episode is if the powers that be were to reverse this decision based on your outrage.
An act like that would confirm to me that the industry is still in the Mickey Mouse stage of it’s development & not to be taken seriously as an investment.

Apr 23, 2011
9:01 pm

My argument is:
- It isn’t scalable for a large (anything over 200) note portfolio.
- don’t think it makes a difference with comments if they are a “good” borrower. Some of the notes I had default for me the borrower wrote very detailed “stories” and responded to every comment in detail. The net result was the same. If someone wants to scam Lending Club, they can make up a very good story.

This isn’t about the “nanny state” since this is a company, not a government. In your case you don’t like the rules you don’t invest. You have other options. While I disagree with your conclusion, it’s fine with me what you do with your money.

I look at it this way though, I own shares of AAPL but I don’t get a chance to ask questions to the board, nor during their quarterly conference call, but I still invest in them.

What I’m saying is the questions for the most part are superficial and making a big stink of an actual minor issue. IMHO their are bigger gripes with P2P lending and specifically Lending Club.

Apr 23, 2011
10:47 pm
#25 Lou Lamoureux :

I tried evaluating loans under the new policy, but I didn’t feel confident on any of them. I am withdrawing most of my idle cash from LC. I may continue to lend, but at a greatly reduced rate.

Apr 24, 2011
8:45 am
#26 Jay :

Dan – Not really sure what you mean by “yell & scream & stomp away”….we’re customers of a company that made a change. I disagree strongly with the change. My options from this point are:

1. Contact the company and express my displeasure. Ask them to reconsider. Renauld wrote: “As always, your comments are welcome as we continue to make improvements to our platform.”
I did this….not exactly yelling or screaming. No response from the company.

2. With no response or further explanation, my next option is to discuss with others and see what their take is….maybe I’m missing something. We’ve been discussing this issue in Matt and Peter’s blog. We have disagreements, but not exactly yelling or screaming.

3. With no satisfaction to an issue that’s important enough, a customer’s only other option is to discontinue business. It’s a normal part a customer/business relationship. Not exactly stomping away. There is NOTHING personal about any of this.

Not that I agree at all with your characterization, but I did find it particularly interesting that in the same entry you wrote :”….you’ll find that I’ve been more of a critic of p2p policies than both Matt & Peter combined.”, then proceeded to criticize others with the “you can no longer have it your way & that it feels good to yell & scream & stomp away…” comment. I guess by your own admission and your own characterization, the only thing you haven’t done is stomp away.

Apr 24, 2011
10:49 am
#27 Archie :

And keep in mind that the q&a helps EVERYONE.

I’ve seen a number of borrowers retract loans once the questioners seemed to uncover holes in their stories. It has been a small # — say 1% — but when we’re working with a overall default rates in the 5% range, removing that many very likely defaulters makes a huge difference.

Additionally I’ve seen loans that have good stats but just don’t gain traction due to bad description and bad q&a. There are a lot of auto-investors out there but not enough to fully fund every loan. So if the due-diligence folks aren’t interested because a loan smells bad the auto-investors reap the benefits of that research when the loan doesn’t fund.

Apr 24, 2011
11:07 am
#28 Matt SF :

And that’s the scary part Peter… that a third party entity just changed policy at both peer to peer lending websites.

Apr 24, 2011
11:11 am
#29 Matt SF :

“The world financial system nearly collapsed because lenders stopped asking questions”

Well said. I would add…

“… and lenders stopped insisting on traditional common sense lending standards and instead, put their faith in a series of quantitative data & easily manipulated equations with variables that could not only be fudged, but altered to suit the users end goal — selling more bad loans.”

Apr 24, 2011
11:26 am
#30 Matt SF :

@ Dan,

Last checked, I’m at 13.4% NAR with 3 defaults and 1 charge off. I went from 15.6% NAR to 13.4% NAR in just the last year. Strangely, 2 of the 3 notes in default are still paying, so not sure if they will ever correct themselves.

You can still unhorse me… but just under a different scenario.

We’ll also get a real world test of my “consistently investing new funds in high NAR% loans will disguise the NAR hit after defaults” theory. Now that I’m out of the game, we’ll see just how bad (or good) my portfolio performs.

Apr 24, 2011
11:30 am
#31 Matt SF :

I am offended as an investor who just got his one of his rights — given by Lending Club since the beginning of my tenure as a LC investor — was taken away.

Truth is, if an investor is motivated to find a borrower, he or she has ample information to find the borrower already (employer name, job title, location). So this does little, if anything, to protect borrowers from lenders.

In actuality, if a borrower is dumb enough to reveal part or all of their identity in the Q&A AFTER EXPRESSLY BEING TOLD NOT TO DO SO, I don’t want to invest in their loan anyway. If you can’t follow basic rules, and you’re in debt or can’t get a secured loan anywhere else, you’re probably too much of a risk for me.

Apr 24, 2011
11:35 am
#32 Matt SF :

Thanks for commenting Lou. Glad I’m not the only one who feels less confident.

Even if Q&A is proven meaningless in the grand scheme of things, having the ability to ask a question provided a “personal feel” to the process.

Apr 24, 2011
11:48 am
#33 Matt SF :

Ditto Archie. I wish I had kept notes and screenshots of all the chicanery and shady things I’ve seen in the Q&A.

It’s important to remember the vast majority of loans are perfectly fine, but as we all know, just a few defaults kill any hope of a decent return.

But for all those who say the Q&A is useless or meaningless in the grand scheme of things… the shady stuff is there… if anyone will actually take the time to read it of course.

That’s because those who have actually gone thru the quantitative numbers LC reports in the loan application by hand or posed via the Q&A section (or using ReadyForZero.com) — proper due diligence — will know the numbers on that loan application aren’t correct.

For example, revolving credit balance is notoriously inaccurate (comes from only 1 credit agency), which ReadyForZero helps to fill the void or confirm existing debt (would like them to include all debt, but I’m told they’re working on it). The Debt to Income ratio does not include mortgage payments (check LC’s FAQ pages to confirm).

So there are gaps in the system… and the Q&A section helps fill it.

Apr 24, 2011
12:07 pm
#34 Matt SF :

I love the Apple analogy, but here’s the problem…

you’re investing in Apple b/c of Steve Jobs, the management team he’s created to run the company, and their history of innovative consumer electronics.

All of which, receives a ton of media coverage (Jobs’ health situation still receives epic TV & print time), so you’re probably getting the most up to date and thorough coverage of a single CEO and corporation since the heydey of Standard Oil.

This said, would you then say the terabytes of available information about Apple, Steve Jobs, and the products they produce is equivalent to a single anonymous borrower at Lending Club?

We can’t even get an accurate balance sheet or full view of a credit report of an anonymous borrower. To get it, requires you have to pose questions in the Q&A and hope the borrower tells the truth (ReadyForZero.com helps in the RCB department).

I’m not trying to be a jerk, just saying the analogy is apples and oranges. But as a shareholder, I’m about 99.9% certain you can pose questions to Apple’s management team via the web or at a shareholder conference, but whether they answer you is an entirely different matter. (Apple notoriously plays their hand close to the vest regarding products, earnings, etc.)

Apr 24, 2011
1:28 pm
#35 Dan B :

How does one retract a loan Archie?

Apr 24, 2011
2:03 pm
#36 Dan B :

My note portfolio & yours are almost opposites of one another. Mine is 70% 3 yr notes, yours is 70% 5 yr notes. Am I pretty damn close?

You spend many minutes evaluating notes, I spend many seconds. Your NAR’s best days have already passed & as you’ve revealed, are on a downward trajectory. Mine has already had it’s worse days & are on an upward trajectory. In fact, even as it stands today, the 3.4% difference in our NAR performance is due almost entirely to the difference in the average interest rates between 3yr & 5 yr loans.

So my question is……..where’s your extra performance for all the extra time, extra effort/work you’ve put in? And what about 6 months or a year from now when the gap between our performance will almost definitely be even closer than today? How can I be so sure of this you ask?

It’s simple really. Right now I’m at approx. 500 notes with 2 “lates” & they’ve both been making payments since Aug/Sept 2010. I have 1 “in grace period” & it’s also on a payment plan. I have had no other “late or in grace period” notes for almost 5 months now. I’m guessing your picture isn’t quite this pretty, is it? So there’s little doubt what my numbers will be 6 months from now or going forward.

So why is all your extra work not translating into measurably better performance? How can the person who doesn’t bother looking at the Q&A section possibly perform evenly with the one who studies it? Could it be that you’ve focused your efforts in an area that, performance wise, makes little difference? That’s all I’m saying.

Apr 24, 2011
2:30 pm
#37 Dan B :

@Jay…..Ok, perhaps I shouldn’t have used yelling, screaming & stomping away to describe what appears to be happening here & at Peter’s blog. And again, in principal I sympathize with your position on this. I just don’t think it’s that important of an issue……….as I’ve already argued extensively in my reply to Matt above. Clearly you disagree & that’s fine.

Yes, I have done my fair share of yelling & screaming or complaining in the past about certain policies in this investment “formerly called p2p”. I will continue to do so when it’s warranted. I haven’t stomped away partially because my complaints so far have not been deal breakers………..but mostly because I know I can make a good stable return on my investment here with little effort.

Apr 24, 2011
3:51 pm
#38 Mike :

They just cancel their loan application. The loan stays listed on the platform, but if you read the Q & A section, many borrowers just say “I’m pulling this loan”, or “I didn’t realize I would have to divulge this much information on the internet”, or some variation on that theme. I’ve seen several loans do this over the course of my involvement lending on LC. I will no longer be investing any new money to LC at this point, and will cash out as the loans mature.

Apr 24, 2011
5:30 pm
#39 Dan B :

I see, thx. for the clarification. I never noticed that. I wasn’t exaggerating when I said I don’t read the Q&A anymore.

Apr 24, 2011
5:38 pm
#40 Matt SF :

What will really throw you for a loop is when the borrower states his/her job title is one thing in the downloadable spreadsheet, but says something totally different in the Q&A. Bigtime avoid!

Apr 24, 2011
6:29 pm
#41 Lou Lamoureux :

So DanB, did you invest in Tassie’s Teeth? Debt Reduction Loan $14K+ monthly income – loan amount $6900. By the numbers it wasn’t a bad loan, but as you pointed out on Peter’s blog it smelled fishy…Did it pass your screens and therefor got funded? Or did you look at the loan, smell something bad and not fund it?

Apr 24, 2011
6:41 pm
#42 Dan B :

It wasn’t bad……..except for the 5.7% interest rate. I mean really 5.7%? Not even it was your money I was lending out!

Apr 24, 2011
7:26 pm
#43 Archie :

Guys — This isn’t about who is doing better than whom etc. The q&as really help EVERYONE (other than scammers) even those who don’t read them, and the q&a doesn’t hurt anyone.

I went to the site and its a ghost town, I guess some people are still investing but the loans are so barren it seems awfully risky….feels more like prosper then lendingclub.

Apr 24, 2011
7:28 pm
#44 Archie :

Dan, I think he was teasing, pointing out that everyone looks at the Q&A at least some of the time. Looking at Q&A isn’t a shame — it helps!

Apr 24, 2011
7:49 pm
#45 Dan B :

@Archie…..That wasn’t in the Q&A. It was the title & the category of the loan, believe it or not.

Apr 24, 2011
8:00 pm
#46 Dan B :

@Archie…..A ghost town? I have no idea what you’re talking about. There’s plenty of investing going on. In fact this month is probably going to be another record breaking month or damn close to one. Today’s the 24th & they’re already at $10 million & they’ll do a million a day from here on in & then get the usual $4 million bump on the 30th. Bottom line, the most ever in 1 month.

Apr 25, 2011
1:51 am
#47 Lou Lamoureux :

Archie, The point I was trying to make is that the loan would have passed most screens as a good loan, but didn’t pass the sniff test (in the case of Tassie’s teeth, the borrower makes $14k+ per month and can’t scare up $6900 for braces? And as Dan pointed out 5.7% rate).

It’s all well and good to rely on analysis of the lending club data like what you’d find at Lendstats.com, but there are faults with the DATA that lower my confidence level (mostly the really short history).

I probably could invest based on my filters alone; however, the Q&A often revealed borrowers who were seriously underwater on their homes, in dire straights and desperate, who didn’t understand credit, or those who accidently or purposefully made mistakes on their App. I have no evidence that borrowers 100k underwater on their mortgage failed to repay their LC loans, but it helped me sleep better at night knowing I wasn’t last in his line of creditors.

From reading DanB’s posts, my guess is that he just goes by his filters and unloads any loans that hit grace period. It’s certainly faster than looking at the Q&A and from other posts it looks like he’s had good luck at selling above par.

Me personally, I haven’t been able to sell “current” loans at par, so I’d imagine I’d have to take a pretty big haircut to unload grace period loans.

-Lou

Apr 25, 2011
5:06 am
#48 Dan B :

@Lou…..You’re right, once notes hit “grace period” it becomes a hassle selling them. If you go to the trading market you’ll see them offered at 10-40% discounts & a lot of them remain unsold for the entire 15 day grace period lifespan. Then once they go to “late” then it’s real problem unloading them at any price.

But that’s not what I do. I unload notes in trouble before they go into grace period. So I sell these troubled notes at anywhere from par to less than a 5% discount. How do I do this you ask? Well that’s the 64 thousand dollar question isn’t it. But Matt knows that I’m telling the truth.

Apr 25, 2011
3:03 pm
#49 Matt SF :

Just curious, but I never understood investing in a non-secured loan for such a low rate. I’d rather have a rewards checking account at 3-4% that is FDIC insured. You have to use a debit card 10-12x per month, but most of us do that (and more) no problem.

Apr 25, 2011
3:08 pm
#50 Archie :

Dan,

I didn’t check the numbers, it just seemed so barren without the dialog. Was used to popping into a loan, seeing a post from retired USMC investor and maybe one more Q.

Maybe people are investing just as much as before, I really don’t know. I certainly am not.

Apr 25, 2011
3:09 pm
#51 Matt SF :

Well said Lou. Just to add to your comment, some of the quantitative data reported in the loan application is occasionally incorrect.

I’ve lost count of how many times (100s I’d wager) that I’ve seen the revolving credit balance amount differs from what the borrower says it is. Ex) Needs 25k for a debt consolidation loan for credit card bills, but RCB shows drastically more or less.

Debt to Income ratio does not include the borrowers mortgage payment (if any). That’s a major discrepancy and should be addressed.

So if you base your analysis on quantitative alone and fail to read the “fine print”, you’re missing out on some very pertinent financial info.

Apr 25, 2011
3:11 pm
#52 Archie :

Well, comparisons to Apple aren’t entirely relevant, BUT

Apple SEC filings have a ton of information in them, far more than the few bits of info in an LC application.

Throw in news reports, products you can use yourself and you have a lot more than at LC. If for instance, the CEO passed away, you’d know nearly immediately. At LC I can’t even tell if the person has a job at all half the time.

As someone else said, you can ask whatever you want of Apple, though
they may not respond. And that’s all we want at LC — the opportunity to
ask questions. If the borrower doesn’t want to respond, that’s his prerogative.

Apr 25, 2011
3:12 pm
#53 Matt SF :

I can verify Dan’s strategy of “selling notes before they go into grace period”. Well, I can’t say I looked over his shoulder and saw him do it, but we spoke about this months ago and it seems to be working for him. Darn good strategy if I may say so. The only downside I can foresee is it could be very time consuming to check the notes every day once you get a 500+ note portfolio.

Apr 25, 2011
3:36 pm
#54 Dan B :

@Matt………I do have a 500 note portfolio & my approach takes only 5 minutes a day. Hardly time consuming. But it has to be done everyday at a specific time of day. I know……..you have no idea what I’m talking about & that’s ok with me.

Apr 25, 2011
3:40 pm
#55 Matt SF :

Most impressive.

Apr 25, 2011
3:45 pm
#56 Dan B :

@Archie….Well thankfully I do know what I’m talking about & there is more investing now than there was last month & the month before that etc etc.

To all the Lending Club investors that used to read the Q&A & are remaining all I have to say is that you now have an extra 10-15 minutes a day of extra free time because you will no longer have to suffer the multi-paragraph long questions posted by RetiredUSMC.

Apr 25, 2011
3:48 pm
#57 Peter Renton :

Dan, One of these days I am going to work out what you are talking about….but keep the clues coming.

Apr 25, 2011
3:53 pm

@Dan B: Funny one dan. RetiredUSMC I assume is one of those investors who no longer invest in LC.

Apr 25, 2011
5:03 pm
#59 Matt SF :

I find a lot of value in his questions, with the exception being the “if loan does not fund will you accept the proceeds”.

Guess he doesn’t like to commit money and wait a week only to have his funds kicked back.

Apr 25, 2011
11:02 pm
#60 JamieP :

I just found this site while searching for the reasoning for the change. Personally, I have over $11,000 invested at lending club and have been with them for just about 2 years now. It was great reading some of the answers to questions when I first started but with larger invested amount it just became too cumbersome for the amount I was making in returns. I’ve averaged about 8.5% and really only go with A or B loans. A question I’ve been wondering about is how much more can you make by asking questions and awaiting responses?

Apr 26, 2011
12:09 am
#61 Matt SF :

Jamie,

That’s a tough question to answer b/c no one has any hard data that the Q&A has a statistically significant impact upon return. Which is why most of the comments above involve us debating over their efficacy.

As for myself, they’re a big part of my due diligence and I think they’re important. As for others who rely solely on quantitative methods (Lending Club’s filters), they say they’re not important and don’t really care.

In the end, the common denominator in the debate was if you used the Q&A or not. If you did, you’re pissed. If not, who cares.

But truth is, there really isn’t any solid evidence either way. I’ve used the Q&A and I’ve outperformed the index. Others haven’t, and they’ve outperformed the index.

Sorry I can’t give you a yes or no answer, but the jury is still out here.

(Would welcome additional ideas from others)

Apr 26, 2011
2:29 pm
#62 Archie :

Jamie,

It’s impossible to tell definitively because each person has a different approach and spends different amounts of time. Its not really a controlled experiment.

I’ve done very well with Q&A, Matt has also done well. I’m a little more quiet about my returns, blogging just isn’t my thing.

Others would say that’s just random chance, investing in riskier 5-year loans, or the effect of spending an inordinate amount of time on research. To me its kinda moot: no one is hurt by Q&A so I don’t understand the posters who aren’t at least neutral on the topic.

And the important thing to me in this thread, is that Q&A helps everyone, not just the askers, and even if you don’t read the Qs. A scammer who knows he won’t have to answer many Qs will have more confidence. I’d actually even go further and say we that all Q’s asked should be visible, to see which a borrower is ignoring. Some borrowers refuse to answer reasonable questions, e.g. “how will you affected by the recent budget cuts by your employer?”

As for the Qs LC currently has available, they just aren’t precise enough, and are very subject to a scammer that prebuilds a vignette.

Apr 29, 2011
12:43 pm
#63 SW :

I was wondering when this blog was going to react to the Q&A change. I felt pretty repulsed when I saw the change at first. I think I would be okay if they had a wider selection of questions… but some loans only have like 3 questions!! It’s like, well then why not ask those questions in the application? Of course we want to know the answers to any and all of these questions!

Definitely very troubling. But I’ve also felt like we’ve had it too good. My rate of return has hung out at about 15% and I’ve been thinking this is too good to be true. I guess I assumed that the trouble would hit in two to three years when LC is watered down, either by too many unwise investors or by hikes in the LC fees.

I’m going to stick with LC for now. I don’t have much invested and I’m just too curious to see if the average rate drops and if this change really does have a negative impact. Anyway, hey thanks for your tips and stats over the past year!

Apr 29, 2011
2:06 pm
#64 Matt SF :

@ SW

Thanks. I wasn’t so repulsed. More like WTF. Identity is already reasonably compromised as is and borrower’s are expressly told not to do so. So a borrower giving away their identity in the Q&A is a great reason NOT to invest in them b/c they’re obviously too dumb to read directions.

But if you really want to feel repulsed, might want to check your NAR vs. your ROI. Where, ROI = (monthly loan payment * loan term limit) – total loan amount / total loan amount. The difference between simple ROI vs. stated NAR will surprise you.

Apr 29, 2011
5:34 pm
#65 Boris :

So where else will you be able to get about 14% yearly ROI with such minimal risk? :)

Apr 29, 2011
7:34 pm
#66 Matt SF :

Such minimal risk? Not to sound facetious, but you do realize peer to peer personal loans are of equal or greater risk than junk bonds? I’m not saying junk bonds or P2P Lending promissory notes aren’t a good investment, or the Prosper & Lending Club reviews are incorrect, but high risk bonds are called “junk” for a reason. In other words, caveat emptor.

Moreover, Lending Club’s 14% NAR is not a simple ROI calculation.

Eq) Simple ROI = (monthly loan payment * loan term limit) – total loan amount / total loan amount.

The difference between Simple ROI vs. the NAR on the note will surprise you.

But if you want double digit ROI, you’re going to have to look at some high-ish risk bonds (junk bonds), low P/E energy MLPs, REITs, and telecom companies, or maybe look into owning physical real estate.

Zacks has an excellent stock screener that you can use to search for dividend paying stocks, and Google Finance has a one as well.

Apr 29, 2011
9:59 pm
#67 Former Lender :

As a former lender who’s knowledgeable about banking, I think it’s more likely that WebBank was pressured by FDIC (their regulator) to protect borrower privacy.

Generally speaking it’s not to WebBank’s advantage to influence its P2P lending partners… unless it is pressured by its regulators to do so. Pissing off FDIC is far worse for WebBank than pissing off Lending Club’s investors.

It’s unfortunate that instead of really trying to help banks develop competent lending programs, regulators tend to care more about “protecting the individual borrowing consumers” from “evil banking institutions.” I’ve seen regulators spend way more time questioning compliance to Reg B/ECOA than making sure banks document the borrowers’ income.

Apr 30, 2011
10:44 am
#68 Matt SF :

All good points Former Lender. I didn’t want to speculate on the exact nature of what happened in the decision making meetings, but this is one of a few scenarios I can support.

May 1, 2011
8:48 pm

Hunh, interesting. I’ll admit, I completely missed hearing about this. Although, as a resident of Pennsylvania, I’m not allowed to invest in Lending Club notes in their funding stages, but must buy them via the Foliofn system, and therefore haven’t had a chance to ask the borrowers any questions anyway. (And while we’re on the subject, how odd is it that I can buy ‘used’ notes, but not new ones? But I digress.) Given that, I probably won’t stop investing, since the change doesn’t really affect me, but I’ll definitely be even more cautious and concerned about just why a particular note is being sold.

May 1, 2011
8:59 pm
#70 Matt SF :

I’ve often had the same “what’s up” with the primary (lending club) vs. secondary (FolioFN) investment options. Doesn’t make a lot of sense to me, but nothing much about finreg really seems to make much sense at all these days.

The lowest common denominator in all this seems to be if you used the Q&A in your due diligence or not. If you did, sucks to be you. If not, steady as she goes.

May 1, 2011
9:07 pm
#71 Mike :

Roger, can investors like yourself ask questions (or now, select the questions that LC has provided) even though your purchases are limited to the Foliofn platform?

May 2, 2011
5:57 am

Matt,

Just got around to reading this, and I have to say I’m sorry to see you go but I completely understand. I was pretty put off by the change myself.

What I’ve found, however, is that there is now so much money chasing the loans that the borrowers don’t have to answer ANY questions, whether canned or not. Rarely do I see a loan take longer than 3 days to fully fund anymore, and most have so little information on them it’s a joke.

I remember I asked a question on a loan I thought was very attractive (when you could still ask a free form question) when the loan was only 30% funded. The loan was 100% funded before I ever got an answer from the borrower, so it wouldn’t have mattered anyway.

I fear I’m a little late to the P2P lending party, as now every jamoke and his brother with an extra $50 to invest is in the game. I’ll bet verifying the accredited investor status of Lending Club investors would shake out a million or so pretenders and return a little balance to the underwriting.

Anyway, end rant.

May 5, 2011
2:57 pm
#73 Joe C :

I also halted my LC investments when I heard this several weeks ago.
I had over $10k in notes, and I listed all of them on the folio trade site, with a 8-10% return upon sale of them, and surprisingly, I have sold quite a few, and my account is now under 10k.

I remember last year I wanted to learn the ‘ways of the defaulter’… and you could, sort of. I would go onto the folio trade site, and you can search for loans that have defaulted or are over 120 days late. You click on that loan, and then you can click on “Show original listing” and then divulge in the Q&A and it becomes quite obvious that that very person was going to default (Hard to explain, it’s easier to just check for yourself)

Again, now that that feature has been taken away, I am done with P2P lending for now. So far my return has been 15.8%, so it was a good run. :)

Take it easy Matt! Thanks for the club!

May 11, 2011
4:57 am
#74 Scott :

I was shocked today when I was browsing through loans I had filtered looking for new investments when I wanted to ask a question and only had three very basic options. Yes, the questions vary by loan type but I didn’t even see an option for input your own question and get it approved. Borrowers include, on average, about one sentence regarding their loan. Most people don’t even add a description. How am I to judge how worthy a loan is with basic filters and three preset questions? These questions should be MANDATORY. Include a budget, your debts and interest rates, etc. Yet somehow, borrowers can answer no questions, write no descriptions and people will STILL fund these $20,000 loans. There is simply too much money chasing these loans for any sort of merit system to work.

I read your blog for the first time in January and since adopting your method have averaged 13.27% with no defaults so far. A great improvement from before.

I am hoping that Lending Club changes their policy to grant investors more freedom because I will not be investing more until it happens.

Good luck with your goals.

May 11, 2011
10:08 am
#75 Matt SF :

Completely agree Scott, and thanks for the kind words on my strategy.

I think it hamstrings investors and prevents us from doing proper due diligence. Investors say they’re doing just fine by using a purely quantitative strategy, and a few certainly are, but the information they’re relying on is dead wrong in a few equations. More reason than ever to go back to the old questions and answers setup, or at the very least, have the borrower answer a number of mandatory personal finance questions.

Then again, maybe they want the process to be easier than getting a “bank” loan, which is why the paperwork is reduced (e.g. fewer hoops to jump through, higher probability of asking for a loan.)

May 11, 2011
10:10 am
#76 Matt SF :

No problem Joe. Was fun while it lasted. Selling 10k in FolioFN notes sounds like it would take a while, but if you find out it doesn’t, let me know and I might do the same.

May 11, 2011
10:28 am
#77 Matt SF :

Exactly EB!

I’ve asked multiple questions from a borrower only to have them go unanswered, yet get 100% funding in half the allotted time. I’ve even asked a question as simple as “please give us a loan description” only to have it go unanswered.

There is so much money within the automated system, and so little enforcement of a borrower having to answer the question, that I’ve seen a 35k loan get funded without a single question answered or even a loan description posted. Lots of potential hazards for investors based on these weaknesses.

I just don’t like the precedent this sets going forward. Changing the rules while the game is being played reeks of instability.

May 11, 2011
10:30 am
#78 Matt SF :

@ Mike,

The investor can not ask questions on the FolioFN platform. It’s strictly a “sold as is” transaction.

May 11, 2011
8:16 pm
#79 Mike :

Thanks, Matt. My question was referring to his ability to ask questions on the loan platform even though he is limited to investing via FolioFN.

May 13, 2011
12:19 pm
#80 John DAWSON :

L C Management’s April 15TH 2011 policy jammed down participating Lenders throats completely SUCKS!

Contributor said Prosper also “pre determined”, pre-approved questions format. Statement is NOT factual. After Management’s stupid decision, I joined Prosper to determine if Lenders allowed to ask their own questions. Answer: Questions NOT edited; all questions answered by borrowers. Contributor’s theory Utah bank issuing loans responsible for recent policy change is FALSE. Otherwise Prosper would be compelled to change their policy too.

L C currently controlled by high $ value, high volume investors who do NOT care IF Lender-Borrower Q/A exchanges continue or NOT continue. Contributor mentioned $20K-$35K loans zero description, zero Q/A; but are 100% funded, issued, within maximum 14-days. $25K-$35K loans currently 60%, slightly higher, fully funded within remaining few hours, and minutes, that remain. In 10-minutes- sometimes less- loans sky rocket from 60% and become 100% funded! Intriguing that small number investors funded loans that have remaining $10K-$15K- only funed by 1 investor! Difficult because Lender FAQ’s limit one investment to $5K! Final $10K-$15K balance funded in short time and issued within 5-minutes after 100% funded! Compare scenario to “Approved” loans small Lenders 100% fund that take 4 days to eventually issue. Do you smell cover-up?

Management has NO filter in place to automatically sound alarm bells concerning applicant’s claimed Gross $ Income Per Month. California Rite Aid P/T Cashier’s $14K per MONTH ($I68K Per Year); Colorado Medical Office Assistant’s $37K Per MONTH ($444K Per Year); Arizona Highway Patrol’s $73K Per MONTH (876K Per Year). You clearly receive picture I‘ve painted. Erroneous Gross $ Income loans routinely 100% funded. Unbelievably, loans are actually issued. Management routinely “asleep-at-wheel” conducting their supposed verification of applicants $ incomes.

Management’s predetermined “Approved” questions PROHIBIT Lender to ask borrower questions concerning Transunion Credit Report’s identified creditor delinquencies and Public Records on File. Public Records exceeding 85-months duration are Chapter 7 Federal Bankruptcy Filings. Debtor’s assets were sold by Bankruptcy Court Trustee. $ proceeds were applied to debts to reduce Debtors unpaid balances. Management conveniently “forgot”(?) important Lender notification capability when bureaucrats designed predetermined pre-approved questions. When Lender discovers creditor delinquencies, or Public Records, Lenders only viable option is to AVOID loan altogether.

I submitted feedback to improve Management’s predetermined pre-approved questions. 30-days later resultsare : NO Acknowledgements. NO Answers. NO Actions. NADA. ZERO. ZILCH.

Lender USMC Retired routinely separated borrower’s BS answers from requested loans hard financial facts. That’s lot better than another Lender who always asked questions concerning borrower’s $ monthly mortgage payments, any HELOCs etc. Problems were borrowers were RENTERS and never understood concept of Heloc’s.

I’m approaching $20K currently invested. Originally $8K invested. Almost $12K principal, interest payments received were reinvested. Management’s “screw-small-lender” completely arrogant attitude dampens enthusiasm to participate funding investments in current, and future, crop of questionable loans currently passed off as “investment grade”.

Investor Services Blake Coler-Dark’s May 10TH 2011 email to all investors who helped initially propel L C over $250 Million loan valuation mark would be insulting if not for fact Sales Executive Dark’s intentions were serious. In lieu of misguided Management’s recent events, more appropriate would have been if CEO Laplanche over nighted bottle of liquid Vaseline to aid Lenders forced swallowing of Management’s April 15TH 2011 mistake.

Over and out.
?
Virginia Beach Lender

May 16, 2011
9:49 am
#81 Mike :

So are you selling all of your LC notes and moving to Prosper, or letting your current investments ride out their term?

May 16, 2011
11:39 am
#82 Peter Renton :

John, I would love for you to give an example of a loan listed AFTER April 16th on Prosper that has a question and answer from a borrower. I am not sure how you came to the conclusion that Prosper still allows this….

May 16, 2011
11:54 am
#83 Dan B :

John Dawson,……. do you also go by the name Retired USMC? I apologize if I’m in error,………it’s just that I see a certain similarity in flair, writing style, economy of words, that sort of thing :)

May 18, 2011
4:53 am
#84 John DAWSON :

No, L C inventory remains through maturity. No, I did not permanently move P2P lending to Prosper. I joined Prosper specificaly to determine IF, after L C Apri 15TH 2011 fiasco, Prosper allowed unfiltered, nonpredetermined Lender questions sent to Borrowers and IF Borrowers returned questions answered. Question I asked Prosper borrowers: “When listing expires, will you accept partially funded loan?” FYI: L C issues partial loans funded in excess 60 percent; Prosper issues loans funded in excess 70 percent. Ten percent difference in minimum $ amounts funded partially explains why L C issues more total loans, more $ value loans, than does Prosper.

May 18, 2011
5:12 am
#85 John DAWSON :

I concluded Prosper still allows unfiltered, nonpredetermined Lender questions sent to Borrowers for their reply because April 16th 2011, immediately after joining Prosper, and with $0 (ZERO) in new Prosper P2P lending account, I sent Lender question …“When listing expires, will you accept partially funded loan?”… All 10 emails I sent to Prosper Borrowers were returned appropriately answered. Exercise merely initial “test”. Because I did not permanently move P2P lending to Prosper, I ultimately deleted all replies received from Prosper Borrowers. Now I wish I had saved Prosper Lender-Borrower Q/A exchanges for documentation to paste into my reply to your question.

May 18, 2011
5:30 am
#86 John DAWSON :

Dan B, Your guess 100 percent correct. USMCRetired, U.S.Marine.Corps.Retired, et al, variations are me.
I’m Master Sergeant (Finance Chief) USMC Retired. Permanently retired civilian occupations are (1) Investing in stock market (extremely up-and-down returns, not recommended for faint hearted investors) and (2) P2P lending (marginally more predictable returns but still not without built in risks.) Both require investors do their own due diligence, otherwise results can, and will, be dismal. Over and out.

May 18, 2011
7:43 am
#87 Peter Renton :

John, Yes you are correct that Prosper kept the direct email Q&A around for a few extra days, but I think you will find now that has been disabled as well. There is no more unfiltered Q&A allowed between lenders and borrowers on either platform.

May 21, 2011
9:10 am
#88 John DAWSON :

Peter Renton,

Today logged into Prosper account ($0 (ZERO) available. You are correct. Propser now blocks lender-borrower direct communication emails.

I explored Prosper loans currently listed. Prosper borrowers who either paid off previous loans, or paying on existing active loans, Prosper provides conveninet link allowing lenders to view status of previous and currently active loans. In thirty seconds propsective Prosper lender knows borrower’s loan information and payment history- either good or bad. Compare easy access to loan verification and payment history Propser provides to prospective lenders with absolutely NOTHING that Lending Club provides. HUGE plus difference definitely in Prosper’s favor.

John Dawson

May 23, 2011
3:48 pm
#89 Peter Renton :

John, I think previous borrower history is a huge positive in Prosper’s favor. I am focusing most of my investments on Prosper now in previous borrowers who have a flawless payment record. Lending Club needs to come out with something like this soon and I think they will. But in the meantime, I think the best performing loans (as in ROI) in the entire p2p lending space right now are previous borrowers on Prosper.

May 24, 2011
11:12 pm
#90 Penny :

Wow, that’s sad news. I had high hopes for lending club too. I liked Lending Club’s format better initially, but on this news I may try out prosper like other posters have commented.

May 27, 2011
2:32 am

I’m glad to see someone is finally addressing this problem. I have found this greatly limits confidence in lending. Many times borrowers have given incomplete answers. To the frustration of lenders, they can only ask the question once. What is a lender to do if the one shot they get to ask question the borrower simply answers “to pay off credit cards” without including the APRs.?

May 27, 2011
8:46 am
#92 Matt SF :

I’m afraid the lender will have to take their answer “as is” or move on. The borrower already had an upper hand based on the creampuff quantitative metrics created by Lending Club to begin with, so this questions and answers screw up places far too much risk on the side of the lender/investor. Therefore, in my opinion, it’s just not worth the risk.

Rather move into high dividend stocks: REITS, MLPS, Junk Bond ETFs, Preferred Stock ETFs, etc.

May 27, 2011
12:12 pm
#93 Newlyfrugal :

Many borrowers do not bother to give loan descriptions. Some claim to earn $5k to $10k PER MONTH gross income for dubious job titles, yet Lending Club indicates “all information not verified.” My question is: when will LC verify the borrowers’ gross incomes? If the info is not verified, a borrower can list any amount they want, correct?

I started investing in LC in Sept. 2010. I have three prepaid loans and one late for 16-30 days. I have $5k in LC and considered adding $5k to $10k, but have changed my mind about adding new money. I will reinvest in $25 increments for another year. If things don’t improve, I may cash in my interest each month.

May 27, 2011
12:25 pm
#94 Matt SF :

Lending Club does verify a small percentage of borrower’s income, but I don’t know the exact amount. They play their approval and identity verification “secret sauce” information fairly close to the vest, but as of 1-2 months ago, I would see 30-40 verified income loan applications out of 300+ loan applicants.

Before this policy change, it was actually possible to ask the borrower to verify their income and a select few of us actually did. As you can imagine, lenders loved this feature b/c it was the only way to avoid the stated income problem you mention, as well as making the borrower go through one additional layer of identity verification (W2s, tax forms, etc.)

May 27, 2011
4:10 pm
#95 Newlyfrugal :

Matt, thanks for the input. After reading what you and others said in the comments, I won’t be adding any more money.

May 30, 2011
3:46 pm
#96 Dan B :

You guys seem so upset with these changes that I feel like I should offer to do my part in conveying your displeasure to Lending Club. I’m planning on swinging by & checking out their new 18k square foot offices later this week so would a symbolic 1 minute sit in suffice? Or perhaps you all would like me to attempt to overflow their toilets? I’m open to other suggestions, but I refuse to wear a sandwich sign, graffiti the walls or personally & publicly irrigate their plants! :) I also refuse to scream “Matt & his friends are mad as hell & they won’t take it anymore”. :)

May 30, 2011
3:56 pm
#97 Newlyfrugal :

Dan, I am not upset over the changes. I am just cautious with my money. I have significant long term funds in investments at Vanguard and Schwab, and thought that I would put $5k to $15k in Lending Club. I started at LC in Sept. 2010, and have not done badly. But the more read about LC on this forum and other forums, and the more I look at the borrowers and their unverified incomes, the more uneasy I get. I will reinvest the returns from my $5k for now, but won’t be putting any new money in. For me, it’s not a matter of being upset or angry. It’s a matter of being prudent with my money.

May 30, 2011
4:13 pm
#98 Dan B :

Hey prudent is good. I like to think I’m prudent as well. That’s why I’ve always set filters to invest only in “verified income” borrowers, no delinquencies, no public records etc etc. I don’t have too many problems finding notes that qualify to keep my $12-13k portfolio fully invested, $25 at a time.

May 30, 2011
4:50 pm
#99 Matt SF :

I appreciate the “sentiment” there Dan-O but whizzing in the ficus tree or pulling a Howard Beale would be frowned upon.

But… maybe you can get a better “off the record” explanation of the recent policy changes.

May 30, 2011
6:13 pm
#100 Dan B :

Frowned upon? You forget, we are talking about San Francisco. Don’t worry, I intend to exercise as much good taste & discretion as the next man.

Of course the next man might be Muammar Gaddafi. :)

Jun 8, 2011
10:45 pm
#101 John Smith :

I think you’re being silly pulling out of Lending Club just because you can’t ask the questions you want. There’s no evidence that asking questions can improve loan performance. Stastical methods are better with a sound theoretical underpinning, and that is what Lending Club does anyway when decidng to accept a borrower and on deciding the loan grade and interest rates.

Jun 8, 2011
10:54 pm
#102 Matt SF :

Really… “Stastical methods” are better and questions aren’t important?

Try telling that to your lender when they ask questions while filling out a mortgage application.

And for the record, the data that Lending Club puts up in the stats section for your quantitative analysis is incomplete. For example, check the Debt to Income equation they use, as well as the stated NAR you think you’re getting vs. the simple ROI you’re actually getting.

Jun 9, 2011
12:04 am
#103 Dan B :

Incomplete? Come on Matt. You & I both know that the numbers that Lending Club put out are as comprehensive, solid & accurate as the GDP numbers out of China. What more could you possibly want? :)

Jul 1, 2011
3:41 am
#104 John Dawson :

L C verifies 15 percent incomes. Lists loan application BEFORE verifiing income. Examples: Receptionsist $50K p m, Cashier $60K p m, Self employed $240K p m. Large volume daily loans means some loans partially, fully funded. Same borrower immediately lists new loan for $ differnce (originally $30K, funded $20K; new loan $10K) without 6-months payment history current loan.

Jul 27, 2011
9:42 pm
#105 Ashley :

I just wanted to take a moment to share some lending club information. I was a lending club borrower.

I had (still have, actually) a great credit score, however was overwhelmed with interest rates with the most recent credit card reform. I asked for and received a LC loan in order consolidate some existing credit.

After a year of holding 6, yes, I received 6 W-2 forms, jobs and barely breaking even my husband and I filed bankruptcy. I was current in every obligation I had, and only filed down to the date that my first Chapter 13 payment would be on or before my next due date. I never one defaulted, to this day, on any of my obligations.

I contacted Lending Club on 3 separate occasions, providing them with my case # and Trustee information asking them to please claim against me, that I was in 100% payback and that I wanted to fulfill my obligation to the private investors.

With each contact I was left with “thanks for the information.” Several months during the claim period passed and I continued (and still do) to check the claims to ensure all of my obligations were in payback.

After confirming with the courts that all of the claims were in and Lending Club was NOT one of them, I was disappointed. I would just like to say thank you to all the investors who have faith in this program- and encourage you to keep lending.

Filing Chapter 13 was intentional, although I could have walked away with a 7 and not have paid a dime to my debtors. I asked creditors for help, lessened interest, feasible monthly payments that put me ahead, not at the bare minimum payments- all of my efforts were declined and I was put in the position to file.

I am happy to know that I am in full repayment and will ultimately meet my 5year goal of being debt free- albeit it the “long road” but again, I am disappointed to see that Lending Club did not make a claim so that I could meet my obligations to my private lenders.

I hope to one day make amends to those who helped me in my attempt to avoid this, until then, I apologize and ask for your forgiveness.

Thank you all for reading!

Jul 27, 2011
9:50 pm
#106 Matt SF :

@ Ashley,

Thanks for your candor and admonition that Lending Club did not follow up with you. I’m not a lawyer, but something tells me it was their fiduciary duty to make such a claim on their investors behalf.

I’ll follow up with you shortly. : )

Jul 27, 2011
10:07 pm
#107 Archie :

Ashley, thanks for the update. Bad stuff happens and we all know that sometimes its just too much; good people file Chapter 13 to get a breather.

The reason I left is we couldn’t ask the borrowers questions anymore. There are so many scammers there (and the number could increase) that I couldn’t judge the risk adequately without being able to ask a question now and then.

I can’t believe LC didn’t file the bankruptcy paperwork. I’m guessing Matt will email you to get your details.

Jul 27, 2011
11:14 pm
#108 Ashley :

I would think so- I tried to research why they wouldn’t and began to wonder if it was b/c individuals were investing so it would be an individual (and sometimes in the scheme of things, minimal) loss overall? Would each investor have to make an individual claim? Even then, LC should have provided each of them with that information so they could do so! Then I found that investors can claim a loss on taxes, so I don’t know if that cancels out the bk claim or not- Either way, I still feel as if LC didn’t give me the opportunity to make repayment to my investors since I couldn’t (or at least don’t have the knowledge to) inform them individually and make things right.

Jul 29, 2011
1:43 am
#109 Dan B :

On the one hand I’d like to feel outraged & can certainly empathize with anyone who feels this way. On the other hand I can’t say I’m that surprised by this considering that these p2p companies make 90+% of their money on loan originations. All the public relations BS aside, it’s not hard to understand why they wouldn’t have a very robust or efficient collections effort. And that’s a problem.

I’m not trying to explain this away, but it’s also not hard to imagine that LC declared it in default & would have bundled & sold her note to an outside collection agency prior to her contacting them & were no longer in a position to do anything about it. Who knows.

Jul 29, 2011
8:34 am
#110 Mike :

It certainly doesn’t inspire confidence in this aspect of LC. The follow up on this situation should be interesting.

Jul 31, 2011
10:07 am
#111 Joihn Dawson :

L C Management does NOTHING effective to collect defaulted debts. Management’s Notes attached to loans in arrears concerning Management’s supposed collection
attempts solely serve Management’s C-Y-A self interests. Management writes off 95% Notes 120-days late.
This week Management set new record for Borrower self entered Gross Income Per MONTH unbelievability- $620K Per MONTH for GA school teacher. ($7.44 Million Gross Income Per YEAR.) Second Place: KY RN $74K Per MONTH ($888K Per YEAR.) Third Place: CA “Nanny” $30K per MONTH. ($360K Per YEAR.)

Jul 31, 2011
10:27 am
#112 Investor Junkie :

@John. I assume these were not verified? As far as the borrower I can assume some legitimately mistook the monthly income as to be annual.

Jul 31, 2011
10:30 am
#113 Matt SF :

@ John,

Can you comment on Lending Club’s duties… if any… that they are required to report claims to bankruptcy courts in matters such as these? Or would this be left to the discretion left solely to the collection agencies?

Jul 31, 2011
3:40 pm
#114 Joihn Dawson :

Reply: Investor Junkie:
Loan applications mentioned posted for Lender consideration WITHOUT Management verifying borrowers self entered Gross Income Per Month $ amount. GA Teacher multplied actual GIPM X 12 (Annual) X 12 (Annual) again resulted in $620K Gross Income Per Month submitted $ amount. KY RN and CA Nanny multiplied actual GIPM X 12 (annual) = submitted $ amount. L C NEVER verifies borrowers GIPM BEFORE posting loans for consideration. It requires Lender to notify Credit Review that GIPM $ amounts are drastically WRONG. Lenders who allow LC to invest their $ automatically are FOOLS.

Reply to: Matt SF: Apparently LC Management only duty is to list borrower applications- however unreal they may be- for Lender dconsideration. I assume Management unloads delinquent loans to collection agencies. What Management does with $ received in exchange for loans they unloaded is unanswered question.

Aug 1, 2011
6:44 am
#115 Joihn Dawson :

Two days last week individual Borrower Notes topped 900 Notes plateau- highest was 958 Notes. After downloaded, opened, current Loan inventory, ninety plus Notes involved Borrowers SUPPOSEDLY:
Assistant Professors, Principals, Professors who work for named individuals but not work for Boards of Education, colleges, school districts, universities?
Directors who work for named individuals but not work for public, private companies, corporations?
Editors, Editors-In-Chief who work for named individuals but not work for well known newspapers, publishers?
Actuaries, “Assistants”, “Boss”, “CEO”, Clergency, Deputy Sheriff, General Managers, Lease Operator, Machine Operator, Managers, Nail Technician, Nurses, Project Engineer, Property Manager, Secretaries,
“Secretary General” and Teacher who work for named individuals but not work for Boards of Education, private, public companies, school distrists?
These predominately HIP Notes smaller $ size loans (less than $10K) but couple loans in $15K to $16K range.
I specifically identified Notes (Borrower ID, Note Number, $ value, Occupation, etc.) in email to Management but NEVER received reply informing me what was going on?

Others supposedly employed but provide only initials, or nothing, identifying their employers?

Aug 1, 2011
9:55 am
#116 Matt SF :

Shady stuff. Removing the Q&A section takes away any ability to see if the borrower is really employed in the profession they say they are.

Aug 3, 2011
9:19 am
#117 Joihn Dawson :

After Management generates media PR, immediate increase number Loan Applications occurs. Significant
number new Loan Applications include Borrowers with creditor payment delinquencies and/or Public Records. Transunion Credit Report Public Records exceeding 84-months duration are Chapter 7 Bankruptcy filing. Chapter 7 Bankruptcy Court appointed Trustee liquidates certain of debtors assets. $’s received applied pro rata to outstanding debts. Remaining debts then extinguished (reduiced to zero $).
When Management crammed down Investors throats predetermined Q’s, conspicuously absent were Q’s concerning creditor payment delinquencies and public records reported on Transunion Credit Reports. Management ultimately produced Q’s for these two subjects. Neither Q very specific. Both Q’s start with generic …”If you have…”. There is NO IF involved. Transunion CR’s display obvious delinquencies and/or PR’s. This is another example how Managemnt repeated, and deliberately, tips scales in favor Borrowers detrimental to Investors.

Aug 11, 2011
2:01 pm
#118 John DAWSON :

Matt,
Received Prosper lengthy email w/chart concerning 2010 loss experiences their loan grades. Real eye opener. Expected loss rates astronomical. What is best way for me to forward entire email to you? 08.11.2011

Aug 19, 2011
10:07 pm
#119 Mork :

I think the lender transparency issue is largely the result of new, stricter federally mandated privacy and disclosure requirements. Lenders are all limited with the types of questions they can ask borrowers…that’s due to discrimination and fair credit requirements.
These fundamental requirements are changing rapidly and changing the industry just as rapidly.

Aug 20, 2011
12:59 am
#120 Archie :

Very unlikely Mark. LC would have said as much if that were the case.

Aug 29, 2011
6:55 pm
#121 KarenSG :

Matt, I completely agree with you. Google gave me this site as #1 today when I searched to see if some other bodies have been venting about the LC question change in format. I stopped reinvesting a year ago, and today I was ready to begin again. I thought I might be able to adapt to pre-digested Q & As. Horrors! Question and answer quality was my primary criteria, as hard as they were to find with no filters to help by sorting out which loans even have a (should be required) description! I’ll keep trying for awhile. The system really sucks for me. Can’t ask a follow-up question to anything–maximum frustration and labor intensive. No way will I let LC do my filtering for me!

Aug 29, 2011
7:08 pm
#122 Matt SF :

Thanks Karen.Didn’t know that about Google… but being #1 is nice.

I’ve divided investors into 2 camps b/c of removing the questions and answers section: those who asked questions vs. those who didn’t ask questions.

If you didn’t, then no big deal. If you did, of which there is/was a sizable camp, you care deeply and probably have stopped new funds and/or no longer reinvesting payments as they’re repaid.

I’ve seen some pretty horrible loans that were auto-funded by the Lending Club algorithm — a guy sending money to a Nigerian scam artist via money order was my personal favorite — so like you, I don’t trust it enough to pick my loans for me.

My returns are around 13.05% now, with no new cash invested since this post went live, so I’d say my quantitative and qualitative (Q&A mainly) was fairly effective.

Aug 30, 2011
6:13 pm
#123 Archie :

Its been a few months. Does anyone have experience or statistics on the newer loans?

My gut is defaults are probably up somewhat, and the potential for a good return based on analysis is greatly diminished. I logged in and everything looked scammy. My notes are still earning excellent returns but they were all purchased before the changes.

Aug 30, 2011
6:24 pm
#124 Peter Renton :

Archie,

I keep track of the percentage of loans that are late at Lending Club and it has remained fairly constant over the last couple of months. It has hovered around 2.4% of outstanding loans on a dollar basis for a while now. So it doesn’t look like the changes have had any negative impact as of yet.

Sep 18, 2011
2:01 am
#125 John DAWSON :

RE: 36 Ashley
Reviewed Notes charged off. Similiar situation loan I helped fund. Collection Log indicates borrower filed Chapter 13 Bankruptcy. Collections Department then immediately charged off loan as …”nonrecoverable”.
I am convinced Collectors do NOT understand basic differences Chapter 7 versus Chapter 13 Bankruptcy filings. Chapter 7 is Asset Liquidation. Bankruptcy Court appointed Trustee sells certain debtor assets, $ proceeds Trustee receives applied to outstanding debts. After $ payments exhausted, remaining unpaid debts discharged by Bankruptcy Court. Chapter 13 is Reorganization (Wage Earners Plan). Debtor’s monthly $ installments paid to Trustee. Trustee applies $’s received to outstanding debts. Eventually Chapter 13 Bankruptcy paid in full. In both Chapter 7 and 13 Bankruptcy filings, Trustee establsihes “Claims Base” identifying debtors, $ amounts owed. Debtors MUST file claim with Trustee in order to receive any $ payments ultimately paid my Trustee. If debtor (i.e., Lending Club is Lenders fiduciary agent) does NOT file claim, then debtor cannot particiapte in Trustee payments.
I’m writing letter to L C Collections Department specifically concerning Note in my pportfolio. Will be interesting IF ever receive courtesy acknowledging letter receipt, much less reply.

Oct 21, 2011
6:53 pm
#126 Xin He :

Dan, I for one agree with you. The metrics I used were basically scoured from blogs like this one. I accepted that as a kid I probably can’t match investors like yourselves, but I can certainly get within 3% using sensible sorting methods, and for far less of a time investment.

How have your returns changed since this post?

Oct 23, 2011
11:38 pm
#127 Xin He :

Matt, I’d be interested to see how your NAR has changed months after this post. I’m also highly interested in how everyone else who was in this discussion has been doing, return-wise after putting a halt on reinvestments.

Oct 23, 2011
11:48 pm
#128 Matt SF :

Hey Xin,

Current NAR is ~13.5%. I’ve had 7 or 8 defaults over the 2+ years I’ve had an account. Also, I noticed that once you stop investing, the NAR tends to drop a little bit b/c as the defaults add up, there is nothing to counteract them. Seems a bit quirky, but after my first 2 or 3 defaults, I noticed that my NAR went back up investing in similar my usual 13-15% NAR notes.

BTW, I saw your post at your blog. Nice work. And thanks for the kind words.

Oct 24, 2011
8:10 am
#129 Mike :

Current LC return is stated at 10.5%, but actually is 9.5%. Have been siphoning out cash that accrues from payments out of my regular account. Really can’t do that with my IRA account, so have been reinvesting payments in that one, and having more difficulty finding loans that don’t seem scammy.

Oct 24, 2011
11:23 am
#130 Archie :

I stopped investing when the policy changed. NAR has stayed roughly same, it rises and falls slightly. That was the whole idea between stopping — I expected the returns to fall when the policy changed so I stopped and locked in the good loans I had already made.

The real question is how the NEW loans are doing. Is it still possible to get a good return (>10%) without asking questions?

Oct 24, 2011
11:33 am

I’m updating my progress and adding new notes along the way. Still getting similar returns:

http://investorjunkie.com/10279/lending-club-october-2011/

Oct 25, 2011
12:22 am
#132 Dan B :

Over 600 active notes now in my personal account which will turn 2 yrs old next month. NAR is at 11.3% & climbing at a consistent .2 to .3% per month as expected. I now manage 3 opm accounts which are all under 9 months old & all doing over 14%.

Oct 31, 2011
8:25 am
#133 John DAWSON :

October 2011 completed 3rd year; notes exceed 500, total $ exceeds $18K. Last $10K invested is monthly interest. Never withdrawn account $. After 300 notes threshold, Returns remain within 12.25 to 12.50 percent, Grades D (26), E (38), F (16) loans comprise 80 percent of investments; Debt Consol, CC Refi are 75 percent of investments. 19 defaults (3.83 pct); 8 Bankruptcies, 2 Deceased. Returns would be higher except 1st year’s mistakes. Reviewed 1st year’s defaults; pattern detected. Corrected mistakes. I eliminated: 1. $25 plus invested in loan; 2. Specific Categories, and 3. Certain Borrower Profiles. After July 2009 I limited investment to maximum $25. I eliminated Business, Move-Relocation Category loans. I eliminated Borrowers: A. Self-employed (except legal and health care professionals who own their law or medical practices) B. Employed less than 5-years same employer C. Intend to borrow significantly more $ than Credit Report indicates owed on RCB debts, D. Borrow $ to “improve” Credit Score or fund “Emergency” account and E. Credit Report indicates Delinquency or Public Record. Public Record on Credit Report after 85th month is Chapter 7 kruptcy Filing. Bankruptcy Court appointed Trustee sold debtor’s assets to partially liquidate debts. Requires many income producing loans to offset few defaulted loans. Difficult to improve returns to higher level, e.g. 13 percent plus return range.

Oct 31, 2011
8:30 am
#134 Mike :

John, thanks for your update. With 80% of your portfolio in lower grade loans, I think your default rate is pretty good. What percentage of your loans are in the 5 year term category?

Oct 31, 2011
1:47 pm
#135 Xin He :

Mr. Dawson, thank you for your update. Will you be pulling out your money, reinvesting more conservatively, or something else perhaps? I feel that as the power shifts from lender to borrower, it would be prudent to switch to more conservative loans (my own portfolio is mostly D-E loans at the moment). Inaccuracies within LC will have a much bigger impact on the ROI on higher-default rate loans.

Oct 31, 2011
9:18 pm
#136 John DAWSON :

In addition to L C Investor Notes data, I maintain spreadsheet: Note No., MM/DD/YY Issued, $ invested, Category, Borrower Occupation, Charged Off (Income Verified? (Y or N), Bankruptcy? (Y or N), Years Employed, etc. From 07.28.2009 to present, 507 Notes invested: 330 @ $25, 164 @ $50, 4 @ $75, 6 @ $100, 1 @ $150, 1 @ $175, 1 $ 225. Rolling Years invested: 1st- 07.28.09 to 07.27.10: 224 Notes; 2nd- 07.28.10 to 07.27.11: 219 Notes; 3rd- 07.28.11 to present: 64 Notes. Rolling Year Charged Offs: 1st: 16; 2nd 2; 3rd 1. Charged Off $‘s: 1 @ $100; 14 @ $50, 4 @ $25. On 04.23.2009 I reviewed 1st partial year’s non-satisfactory results; received loud and clear “wake up“ call. Implemented plan to immediately eliminate proven losers; e.g., NO more Business, Move-Relocate Category; Self Employed, Employed < 5-years investments. Future investments maximum $25 each. After 07.28.2010 total 283 Notes invested; 4 Charge Offs @ $25. (1.41 pct Charge Off rate). 507 Notes status: Paid-in-Full 51; Defaults 19; Modified Pay Plan (Interest only an extended period): 11; Current 426. Note Terms: 36-months: 255; 60-Months: 252. I learned from early poor choices that resulted in rash of NAR crippling Charge Offs. 19 Charge Offs reduced 16.54 percent Weighted Average Return by 4.12 percent to current NAR 12.42 percent. 1 Note Charged Off reduces WAR by .20 percent (1/5 of 1 pct). Imprecise percentage because Charge Offs were varying $ amounts. Long term goal is minimum 12 percent ROI before LC deducts service charges. Must continue revised investing plan; primarily invest D, E, F- occasionally G- Grade Notes that meet specific criteria. Majority of Notes are eliminated in selection process; only Notes qualified for investment remain. Over and Out. Semper Fidelis.

Oct 31, 2011
9:34 pm
#137 Xin He :

John, I’ve read through all your posts thoroughly. You’ve done me and many other investors a great service. Thank you very much.

I am a bit confused though, in previous posts you seemed quite cynical about LC’s collection process and its note data. Am I correct in saying you still feel confident enough in LC as well as your own ability to continue reinvesting in high-risk loans at 25$/each?

Nov 1, 2011
11:40 am
#138 John DAWSON :

Subject: 510 Notes invested; Categories, 19 Charged Off, Percentages. Business 25/5 (20%), Debt Con 318/11 (3.46%), Education 5/0, Home Purchase 12/0, Improvement 44/1 (2.27%), Major Purchase 3/0, Medical 6/0, Move 4/1 (25%), Other 5/1 (20%), Refinance 47/0, Renewable 3/0, Vacation 4/0, Vehicles 15/0, Wedding 19/0. Employer Charge Offs: Fed Gov’t 1, Muni Gov’t 1, State Gov’t 2; Retired 1 (deceased), USPS 1, Various: 13. Income Verified but Charged Off: 11. Income NOT Verified but Charged Off: 8. Years employed, Charged Off, Percentage: < 3 yrs: 11 (58%), 4 to 9 yrs: 4 (21%), 10 yrs: 3 (16%), Retired (deceased): 1(5.0%).

Definite correlation exists between high number Charge Offs involving Business, Move-Relocation, Other, Categories and borrowers being < 3 years employed same employer. Negligible difference exists if L C verified borrower’s income, or if L C NOT verified borrower’s income.

LC provides lots of “Lip Service” to Investors that Management actively attempting to collect, Past Due, Non-Performing, Defaulted, and Charged Off Notes. But reality is Management enters voluminous contact notations concerning their attempts to contact borrower, and pending legal actions, for Investors to read, but does little, if anything, to effectively collect defaulted $ due Investors.

Investors still can achieve respectable ROI, e.g., 12%+ before L C S/C deducted, investing in Grades D, E, F, G Notes. Key: Select well qualified civil service, active duty/retired military, academia, legal, health care categories employees, and freight/mail deliverers, e.g., Fed EX, Rail Roads, UPS, USPS, employees who primarily requested Debt Consolidation, Home Purchase, Home Improvement, CC Refinance, Vehicle Financing, and Wedding Category loans.

Renewable Energy, Vacation loans are few. If you find well qualified Borrower consider investing ASAP. immediately.

Nov 1, 2011
12:41 pm
#139 John DAWSON :

Xin He,
You’re correct; L C recently tipped scales from Borrower-Lender even playing field to favoring Borrower. Extremely irritating is Lenders CANNOT ask same question TWICE because Borrower NEVER asnwered initial question. Borrowers often provide generic B/S answers that are NOT in any way whatsoever relevant to question(s) Lender asked. During L C’s first year, often maximum 150 loans listed daily for Lenders consideration; thus Lenders confronted with limited selection from which to choose. L C simultaneously now lists 500, 700, up to 950 loans daily. When Lender encounters uncooperative Borrower then automatically eliminate that Borrower from investment consideration and replace Borrower with another Borrower who is cooperative and provides answers that answer the questiona nd that make logical sense.

There are multiple methods to skin cats (Borrowers). Those multiple methods are VARIETY in selection process.
That way

Nov 3, 2011
8:05 am
#140 John DAWSON :

L C SELF STATED JUNE 1 2007 TO JULY 1 2009 NOTE CATEGORY, GRADE DEFAULT, CHARGE OFF STATISTICS.
READ FROM LEFT TO RIGHT, TOP DOWN:
1ST: LOAN CATEGORY; 2ND: 31 TO 121 DAYS LATE PCT; 3RD: DEFAULT AND CHARGE OFF PCT:
CATEGORY GRADE PCT PCT
ALL C 2.40% 4.45%
BUSINESS D 3.95% 9.18%
CAR FINANCE F 0.43% 2.38%
CONSOL DEBT D 2.72% 4.10%
EDUCATION C 2.25% 6.76%
HOME PUR B/E 1.53% 2.99%
HOME IMPROVE C/E 2.47% 3.87%
MAJOR PUR C 0.30% 3.84%
MEDICAL B 2.53% 2.23%
MOVE-RELOCATE C 1.85% 8.23%
OTHER B 2.41% 5.53%
REFINANCE CC D 1.60% 2.44%
RENEW ENERGY NONE 0.00% 0.00%
VACATION C 0.00% 1.10%
WEDDING D 0.87% 1.36%

Interesting to compare 1st 2-yrs Default and
Charged Off Notes perentage(s) to Statistics
Table L C provides to current Invesors?

Semper Fidelis

Nov 14, 2011
3:51 pm
#141 Evan from MN :

So, if not P2P, what will you be investing your money in, in the future?

Nov 14, 2011
5:03 pm
#142 Matt SF :

High dividend REITs & MLPs, usually in the “things we can’t live without” variety. Things like housing, gas pipeline companies, etc. Also looking at real estate deals.

The money I had in P2P was only in the pilot scale experiment range, so glad I didn’t go all in.

Nov 15, 2011
12:35 pm
#143 Craig B :

This pissed me off as well, but they are somewhat ameliorating the problem by continually adding more preset questions and accepting suggestions from lenders. I’m still getting a better return from my LC investments than anywhere else, so why throw out the baby with the bathwater?

Nov 15, 2011
12:46 pm
#144 Matt SF :

First, the NAR% isn’t the same as a simple ROI% calculation. LC uses some funky math to overstate the return. Take a 20% NAR loan application, do a simple ROI calculation, and you’ll be surprised what you’re really getting.

Second, a lot of the guys that were at LC aren’t there anymore. Service is down, and my trust went with them.

Third, and most importantly, there are far better returns in REITs, MLPs, and other high dividend stocks available in the market, plus you get the option of equity appreciation if you hold long enough.

Last, I don’t trust any organization who can shift the rules in mid game away from the investor as Lending Club did here with removing an investor’s ability to ask uncensored questions. If they want to setup an automated investing (e.g. fee based cash cow for them), that’s all well and good, but it won’t be with my cash.

Nov 16, 2011
9:49 am
#145 Evan from MN :

Well, I’m glad I read this. I was just about to go big into LC. Where should I begin learning about high dividend REITs & MLPs? Do you have any you’d suggest? Thanks again Matt, this blog has been more than helpful.

Nov 16, 2011
10:06 am
#146 Matt SF :

No problem. The best place IMO is probably this website…

http://www.dividenddetective.com/mlp_directory_pipelines.htm

The site owner has devoted substantial time into listing individual companies, but also explaining what makes sectors unique, how to do some of the research, etc.

A word of caution though: if you’re just starting out and learning about them, I’d advise you study up and maybe seek some outside advice. I can’t give you individual names myself b/c that’s not what this blog is about, but if you want help narrow down your search, a stock screener set for high dividends, low debt, low P/E ratios, etc. is a good place to start.

Here’s a post how I do it…

http://steadfastfinances.com/blog/2010/02/19/how-i-find-the-highest-paying-dividend-stocks/

Nov 17, 2011
4:12 am
#147 Dan B :

So I understand you correctly, when you say that there are “far better” returns in REITs, MLPs & high dividend stocks……….what exactly are you using as a basis for the comparison? Are you comparing them to the 17% returns you were getting back in the day, or the returns you’re getting now? Or is it some “average” of what you think others are making that you’re comparing to?

You see, unbelievably as it may sound, I’m still spending 10 minutes a day investing & managing several accounts at Lending Club & I’m just trying to figure out if your advise/opinion could apply to me.

I mean so what if I’m on my 12th month in a row of 12-14%+ annualized real world returns. So what if I know that I can maintain those numbers with little effort. Just say the word & I’m ready to chuck it all & go buy some MLPs or preferably some REIT’s that’ll give me some eye popping returns :)

Nov 17, 2011
4:54 pm
#148 Matt SF :

Dan,

Understood Dan. But as we’ve discussed before, 17% returns at Lending Club isn’t exactly 17% return on investment.

If memory serves, a 20% NAR note only yields about 10-12% ROI. But I think the highest NAR I ever got, on the whole portfolio, was ~15.7% NAR.

But in relation to those “far better returns” I mentioned, here are a few examples after using the Zack’s screener…

Cellcom – CEL – 14.2% yield
Annaly Capital Mgmt – NLY – 14.7% yield
ARMOUR Residential REIT – ARR – 19% yield

So you get these yields, and yes, management will occasionally screw you by lowering the dividend if they have a bad year or quarter, but if you do the due diligence, you’re looking at less work, higher yields… and… the chance for equity appreciation.

Nov 17, 2011
5:20 pm
#149 Dan B :

That’s a 10.4% yield on CEL, by the way. This is an interesting pick considering that you’re likely looking at some real wide swings every single time someone in Tehran wakes up on the wrong side of the bed & decides to threaten to wipe out the Jews……..or vice versa.

Jan 6, 2012
5:58 am
#150 Lendingclubdan :

Are the questions really that big of a deal? If you spread your money around wide in small increments, do a little dilligence on each loan and invest in only certain scenarios, how much risk am I really assuming?

I hand pick all of my loans, enjoy doing it and have only one that’s in default (80+ loans). It’s not even defaulted, on a payment plan. Maybe I have just been lucky?

My concern with LC has never really been about a loan going bad, more like the site going bad and my money disappearing. I no longer think that’s a real worry.

I have never asked a question, I read the questions asked, but I find it to be one of the most useless pieces of info given. It’s like a turn signal on a car, if it’s on all I can discern is it’s working. It doesn’t meant the driver really intends to turn. Just like with the questions.. ok so the borrower answered… how can I know the info is real anyway?

Jan 6, 2012
10:17 am
#151 Matt SF :

Dan,

Your confidence probably has something to do with a short amount of time using Lending Club and the fact that you have no defaults as of yet. If you go back and read some of my old posts, you’ll see much the same in writing.

But yes, questions were a big part of my strategy. Years later, I’m still outperforming Lending Club’s index return by 4% NAR.

And while I like your optimism, 80 loans is a small portfolio. So enjoy your good fortune while it lasts, but it’s only a matter of time until you get a few notes that default in <6 months b/c they declared bankruptcy, skipped town, a scammer/identity thief gets through the system, etc., and Lending Club does next to nothing on the collections side… but charge it off.

I’ve actually had borrowers who declared bankruptcy contact me suggesting Lending Club didn’t do all they could to collect our funds, so you can take it for what it’s worth to you.

Jan 6, 2012
10:28 am
#152 Xin Tendo :

Matt, what do you think is the #1 reason behind defaults at LC? Do you think Identity theft is that big a problem or are most defaults a legit inability to pay up?

Jan 6, 2012
10:38 am
#153 Matt SF :

Xin,

I honestly don’t know, so anything I say will be speculation, but if I had to guess… I’d say the economy. Job loss is probably the biggest risk, but other contributing factors would be poor personal finance decisions (which leads to bankruptcy or refusal to pay).

Scammers are always going to get through, which is why I mainly stuck with verified income/identity notes, but I’ve had both verified and non-verified notes default & be charged off.

Jan 6, 2012
10:58 am
#154 Mike :

I believe medical costs are the number one cause of personal bankruptcies in this country. I’ve had my share of scammers, though. One payment wonders, I call them.

Jan 7, 2012
3:11 pm
#155 chris :

Hello Everyone thanks for this blog

My ? is.

they suggest to allocate 25k over 800 different loans to reduce4 risk. You folks seem to be talking about vetting the borrower and funding the whole loan of people you have screened.

is that correct

so bottom line you feel their idea of super diversification is not best plan.
thanks thanks thanks

Jan 7, 2012
4:17 pm
#156 Matt SF :

25k over 800 loans would take some time to deploy if you hand pick them yourself, and honestly, you probably would either burn out reviewing that many loans in < 24 hours or begin picking lesser quality loans.

If I were going to put that much money in Lending Club and want it deployed in less than 1 month, I’d probably do something like $50 per loan.

Just remember that 10% NAR isn’t the same as 10% ROI like in a savings account or stock dividend, and your money is tied up for 3-5 years.

Jan 14, 2012
1:49 pm
#157 John DAWSON :

Hi Mike,

I’ve experienced them. Their redetermined mind set is to repeatedly lie on application, and answers, become funded ASAP and then conveniently opt for bankruptcy. Unfortunately Lenders send them with cash-in-hand happily to waiting bankruptcy lawyer where they pleade no $ assets and file bankruptcy. My last default was Michigan Pharmacist $144K per year income indicated on application two months after securing fully funded $35K loan applied for interest only Payment Plan. Three months ito PP defaulted.
If their intent is to scam nothing will stop them.
John Dawson

Jan 14, 2012
2:13 pm
#158 Mike :

Thanks, John. I was beginning to think I was the only one who was experiencing these…

Feb 20, 2012
2:10 am
#159 Ken H :

I’m still making 10.16% on my portfolio of about 236 loans, but I’ve had 19 defaults out of a total of about 320 loans. Still the defaults add up to about $1000 and I’ve received a bit over $3000 interest. I stopped investing with them when they stopped letting me ask questions.

Mar 1, 2012
9:52 pm
#160 Dan B :

Ken H……No one has stopped you from asking questions. You just can’t make up your own questions.

So the 19 defaults were from the group in which you were allowed to ask your own questions, correct? How does that compare to the average default rate nowadays when you can only ask pre-approved questions?

Mar 1, 2012
10:07 pm
#161 Mike :

Ken H. that’s almost a 6% default rate. I have a similar sized account with 312 notes with 6 defaults valued at $164. I have not added any new funds to LC since their policy change, but I have been reinvesting interest payments as they accumulate. According to LC, my return is just north of 10%, so in real life it is probably closer to 9%.

Mar 11, 2012
8:02 pm
#162 John DAWSON :

For What It’s Worth:
605 Notes Invested, $20,325 Total invested, $3,216.38 interest received. 26 Notes Charged Off, 4.30% C/O rate, $849.39 investment lost. Last Note issued that became Charged Off: 05.14.2011. Stated Investment Return: 12.31% before expenses deducted. More Notes invested/issued; similar C/O % rate, Investment Return % equal to previous posts.
Predetermined questions asked by Lenders commenced 04.15.2011. Cannot definitely state either Pro or Con IF predetermined questions asked produce better results (less defaults/charge offs) than Lender generated questions asked. Requires more Notes invested before I can make that decision.
After January 1st 2011 I “tightened up“ Borrower investment criteria, e.g., now primarily Medical (Physician, Dentist, Chiropractor, RN, etc), Med Tech (Chemo, CT, Lab, MRI, X-Ray, Ultrasound, etc.) Legal (Attorney, Paralegal, Legal Secretary/Assistant, etc.) Financial (CPA, Financial Planner, Registered Investment Advisor, Stock Broker at major brokerage, etc.) all Engineers w/5+ years service, Military (All active duty Officers; Junior Enlisted E-5 and below w/5+ years service; Senior Enlisted E-6 and above w/10+ years service) and Fed/State/Municipal Civil Service w/10+ years service, Charge Offs dropped significantly.
I normally “pair” Notes- $100 invested: $25 12% Physician/Attorney, $25 15% Engineer/Military, $25 17% Civil Service, $25 19% “Other” = 15.75 % average. To achieve 12%+ Net Return you must exceed 15%+ Weighted Average BEFORE Charge Offs.
700+ Loans listed daily is easier to “cherry pick” higher quality Borrowers. I pass on virtually all Borrowers at current employer for less than 5 years. Exception: Professionals (Attorney, Physician, specialized Engineers, Military Officers, etc.). Borrowers at current employer less than 3 years are highest actual Charge Offs so I avoid them. Period.
John Dawson

Mar 11, 2012
8:08 pm
#163 Xin Tendo :

John, Do you base your strategy on a stats site like NSR or Lendstats, or is that your personal strategy? I have not invested in new notes in quite a while but I remember seeing NSR and interpreting their data to find that Been Employed >=2 years was a conservative enough metric for me.

Mar 12, 2012
11:05 pm
#164 John DAWSON :

RE: Xin Tendo,
26 Charged Off Notes included 14 Borrowers who were at their current employer <5 years. Specifically, 10 Borrowers were at their current employer <2 years. At 1 year mark investing in Notes I evakuated Defaults and Charge Offs. I decided Borrowers who were at their current employers <5years were inheritantly too risky. Now I eliminate virtually all Borrowers who are at their current employer <5 years from consideration. I decline the investment opportunity. Instead I offer another Lender an opportunity to lose their money.
John Dawson

Mar 12, 2012
11:08 pm
#165 Xin Tendo :

Ah, gotcha. You really do your due diligence. I base my metrics by what Nickel Steam Roller reports. Your system makes me look the laziest guy in the world haha.

Mar 13, 2012
6:55 am
#166 John DAWSON :

Xin Tendo,
Year ago I explored LendStats; decided too cumbersome for me to be effective. Thanks for Nickel Steam Roller tip. I perused NSR data. NSR more useful data for me than LendStats; can selectively sort NSR data. I’ll definitely employ NSR as collateral Note selection reference.
Semper Fidelis
John Dawson 03.13.2012

Mar 14, 2012
7:43 am
#167 John DAWSON :

03.14.2012
In latest instance of stupidity L C Developers today implemented their new improved (?) version of Borrower loans that are down loadable as spreedsheet. Glaring OMISSION is Borrowers JOB TITLE. Old version of down loadable spreedsheet displaying Borrowers JOB TITLE available only through 06.15.2012. After 06.15.2012, Lenders are force fed only spreedsheets new version. The new version is absolutely worhless. Forcing Lenders to guess in what capacity Borrower is employed is nail-in-the-coffin ensuring Lenders exit P2P lending platform.
John Dawson

Mar 20, 2012
4:05 am
#168 John DAWSON :

03.20.2012
Used NSR to determine States where Borrower loan probably Defaults/Charged off lowest and highest.
L C Default/Chanrged off average: 4.58 PCT = 1.00 Norm
Read L-R: State ID, State PCT Default/Charge Off, State PCT vs. 4.58 PCT L C Norm
AK 4.59 - 1.00 AL 3.40 – 0.74 AR 3.92 – 0.86
AZ 4.75 – 1.04 CA 4.97 – 1.09 CO 5.20 – 1.14
CT 2.67 - 0.58 DC 3.23 – 0.71 DE 5.96 – 1.30
FL 6.24 - 1.36 GA 6.31 – 1.38 HI 3.72 - 0.81
IA N/A - 0.00 ID N/A – 0.00 IL 3.85 - 0.84
IN N/A – 0.00 KS 2.82 – 0.62 KY 4.80 - 1.05
LA 2.77 – 0.60 MA 3.77 – 0.82 MD 4.91 - 1.07
ME N/A – 0.00 MI 3.99 – 0.87 MN 5.04 - 1.10
MO 6.22 – 1.36 MS N/A – 0.00 MT 4.50 - 0.98
NC 2.30 – 0.50 NE N/A – 0.00 NH 4.67 - 1.02
NJ 4.59 – 1.00 NM 2.85 – 0.62 NV 8.12 – 1.77
NY 3.94 – 0.86 OH 3.40 – 0.74 OK 3.80 - 0.83
OR 4.53 – 0.99 PA 4.53 – 0.99 RI 2.60 - 0.57
SC 4.63 – 1.01 SD 3.66 – 0.80 TN N/A - 0.00
TX 4.14 – 0.90 UT 6.81 – 1.49 VA 3.33 - 0.73
VT 4.17 – 0.91 WA 4.71 – 1.03 WI 4.28 - 0.93
WV 4.15 – 0.91 WY 0.00 – 0.00 (No defaults)
NA = <50 Loans). SD 82 loans; VT 92 loans; WY 100 loans. DATA: 2,254 Defaults and Charged Off in 49,196 loans issued.

Mar 20, 2012
4:17 am
#169 John DAWSON :

RE: Post No. 168 – State Default/Charge Off Rates
FIVE States Borrowqer loans Default/Charged off MOST frequently:
NV UT GA FL MO
TEN States Borrower loans Default/Charged off LEAST frequently:
NC RI CT LA KS NM DC VA AL OH
Note: WY 100 loans issued; 0 (ZERO) Defaults/Charged off.
Summary: Where Borrower lives influences if loan performs to term (Good) or sours (Default/Charge off).

Mar 20, 2012
4:25 am
#170 Mike :

Great info, John. I’m surprised that CA didn’t make the top ten list. Maybe I’ll limit my loans to WY from now on…

Mar 23, 2012
9:35 am
#171 John DAWSON :

Matt,

1.00 = L C 50 state average for Borrower loan defaults.

CA Number 9 of 10 top States for probable loan defaults:
NV 1.77 UT 1.49 GA 1.38 FL 1.36 MO 1.36
DE 1.30 CO 1.14 MN 1.10 CA 1.09 MD 1.07

NV (1st) GA (3rd) FL (4th) high b/c unemployment; all experienced high number FDIC bank failures caused by soured mortgage loans. CO, MN experienced disproportionate number FDIC bank failures of small community banks lending in agricultural areas.

Stable federal emloyement/active duty military driven high growth Washigton, DC Metro area includes DC .71, VA .73 and MD 1.07. Compared to L C 1.00 state average, DC, VA Borrowers 29%, 27% LESS probable to default; MD Borrowers 7% MORE probable to default.
MD Borrowers experienece approximate 40% higher default rate than do VA Borowers.

What surprised me is UT (2nd)) highest probable for defaults. UT promotes itself as low unemployment, better than average economy. UT experienced minimal FDIC bank failures. What’s occurring behind-the-public-persona in UT means that Lenders must not be aware of underlying reasons causing high default rate.
John Dawson 03.23.2012

Apr 3, 2012
12:11 pm
#172 John DAWSON :

Contributor asked Question: Correlation between Loan Titles, Borrower answers and Defaults?
My answer: Quite probably.
Reveiewed my Defaults. If Loan Title includes HELP, FRESH START, STARTING OVER (ESPECIALLY “AGAIN”), PICK/SELECT ME, etc and/or Answers include L C ONLY POSSIBILITY, BANKRUPTCY AN OPTION, DESPERATELY NEEDED IN ULTRA SHORT NUMBER DAYS, LARGE $ VALUE ($20K+) LOAN WILL BE PAID IN MUCH SHORTER TIME FRAME THAN APPLICATION REQUESTED, et al are “RED FLAGS” flying high in stiff breeze over all-too-probably Defaulted Loan. Borrower is Default searching for convenient Loan Portfolio wherin to deposit her/him self. My reommendation to Borrower is: Thanks, but NO thanks.
John DAWSON 04.03.2012

Apr 21, 2012
7:51 am
#173 JOHN DAWSON :

Called L C Collection Department. Purpose: Determine why $30K loan’s $15K balance Charged Off after 1 missed payment. Collection History said Borrower filed Chapter 13 Bankruptcy; NOT economically feasible to collect balance. Chapter 13 Bankruptcy is WAGE EARNER REORGANIZATION PLAN. Debtor’s debts are restructured into lower monthly payment and Borrower ultimately pays off debts. Idiot I spoke with said Collection Department automatically charges off ALL Bankruptcy Filing loans. Summary: L C collects 4.50% origination fee, provide lip service to Lender then promptly screws all Lenders when Borrower files Chapter 13 Bankruptcy.

Apr 21, 2012
8:12 am
#174 Mike :

I wonder if that is why I was able to sell one of my notes that had filed for bankruptcy a while back. I can’t recall if it was Chapter 7 or 13, since this was before they disallowed selling a note in bankruptcy. Maybe the buyer thought he/she would be able to recoup. Now I just sell any note that is ‘incipient’ grace period.

Apr 29, 2012
12:28 am
#175 Xin Tendo :

NAR for my portfolio has dropped to 5.8%. Average maturity of my portfolio is about 1 year.

Issued & Current 78
Fully Paid 10
Charged Off 6

Average loan size 27$

I used a low-scrutiny method. Just gathered the recommended filters from various finance blogs and made a few portfolios. 5/6 chargeoffs are 60 month loans.

May 10, 2012
3:05 am
#176 JOHN DAWSON :

Xin Tendo:
Best Borrower occupations: Professionals- Legal (Attorney, Paralegal, Secretary, Courts), Medical (Physician, Dentist, Chiropractor, Psychologist, Psychiatrist, RN’s, Special Technicians- XRay, Ultrasound, Sonographer, EKG, Lab, Chemo, etc), specialized Government (FAA- ATC, DOJ- ATF, FBI), Public Utility (Lineman, Electric/Gas Generating and Water Plant Ops, etc.), Railroad, Special Teacher- Special Edu, Reading, Speech, etc.)and Senior Military Officer and NCO. Once secure US Post Office jobs quickly disappearing. DOD budget cuts will be same for DoD civilians. Law Enforcement- Corrections-Police-Sheriff jobs subject to budget elimination.
Notes inventory now 650+. NAR averages 12.20 to 12.35 PCT. Fully paid = 16% of Notes. Charged Off = just below 5% of Notes.
04.15.2012 L C “Improvement” to DownLoad File conspicuously omits Occupation/Position description.
John Dawson 05.10.2012

Jul 15, 2012
4:22 pm
#177 john :

I think you are a cry baby. They clearly did this to save on staff to review custom inquiries. It has nothing to do with privacy.

Jul 26, 2012
11:26 am
#178 Mike :

John is retired USMC. What is your definition of cry baby?

Jul 29, 2012
1:45 am
#179 John Dawson :

TO JULY 15, 2012 4:22 PM ANONYMOUS CONTRIBUTOR:
Reviewed ASININE comments that conveniently failed to identify yourself. P2P Lending is NOT grand liberal SOCIAL experiment; instead is BUSINESS that ultimately
MUST be PROFITABLE. Questions that L C Management instituted April 15th 2012 are self-serving “lip service” instead of important questions, i.e., Q asks Borrower concerning Public Record(s) but does not inform Borrower what a Public Record entails, Q asks Borrower “What are the expenses“, but does not inform Borrower Q concerns MEDICAL expenses, etc.
Concerning your comment that I am a “cry baby”, you most probably never served one day in U S Military Branch of Service. Instead during Viet Nam War, et al, your lazy fat civilian butt permanently glued to soft sofa before color TV. On Election Days you probably voted straight ticket for liberal politicians promoting elusive “Great Society”.
Summary: During a long walk do take a one way detour off a very short pier.
John Dawson 07.28.2012

Jul 29, 2012
2:52 am
#180 Dan B :

I’m really impressed, amused & bemused that you guys are still talking about this same Q&A thing. Keep this up for a couple more years & you all will be giving the Prospers.org people a run for the money for keeping a dead & decomposed topic alive! Of course they actually think that they stand a chance of getting some money at the end of the day. As for you guys, well not so much. :)

Meanwhile, as my 3 year anniversary at LC quickly approaches, these Q&A changes have had no effect on my mid teen returns or on my note selection procedures.

BTW, I could come up with an impressive list of terms to describe Retired USMC John Dawson, :) but cry baby wouldn’t be one of them.

Feb 3, 2013
1:33 am
#181 Xin Tendo :

My NAR has stabilized ~7%, have not reinvested since early 2011.

Learned a lot of lessons playing this game, first and foremost, that using anything other than robust data will get you clowned.

I now invest using this man’s ‘genetic algorithm’.

http://blog.dmpatierno.com/post/3161338411/lending-club-genetic-algorithm

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