Thursday, February 5, 2009

lendingclub - 02/01/09 late loan stats update

These charts show statistics for the performance of all loans. (If you were looking for stats, find them here.)

Each curve represents the set of loans that were created in one calendar month. The vertical axis is the fraction of those loans that have "gone bad", in other words are 1 month late or worse (up to and including default). The horizontal axis is the observation date. All data comes from Lendingclub's performance web page.

The curves are "noisy" (ie they jump up and down a lot) and are not as orderly as the curves on the prosper chart. That's because the volume of loans at Lendingclub is still too low to get really good stats.

Something odd is happening in the last month. Looks like lendingclub must have goosed up their collections activity. Bravo!

Lets slide these curves over to a common origin, so we can visualize how common their shapes are...

Just look at where these curves crossed the 390 day line, (ie 30 days after the 360 day line, because it takes 30 days for a loan to become 1 month late) or visualize where they might cross the 390 day line as they extend, and that tells you what fraction of loans went bad in the first year. This is then an estimate of the annual default rate for Lendingclub loans.

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  1. the reason why delinnquencies go down in February is post holiday seasonality when all banks see lower delinquencies due to more consumer liquidity

  2. Regardless, you're missing the bigger picture here. Lending club says they have 9% returns. This is patently untrue. The high "returns" are due to the fact that there are no defaults in the early months, a fact known in teh industry as "speedboating." as tranches have had time to mature, defaults develop. If average interest rates are in th 11.5% range and defaults are around 10% after a year and a half and you take out a 1% service charge, you see why returns are actually in the 3% range.

    Lending club would like you to believe that because they booked a loan at 12% apr a week ago and that because interest has accumulated on that loan for a week and it hasn;t defaulted yet, that we should think that loans like this have a predictable 11% (12% - servicing) yield. This is deceptive at best.

  3. Arthur, I reject your seasonality hypothesis, because I don't see it in the data, only in the lendingclub data. Therefore it seems more likely that the recent blip down is due to something going on at Lendingclub specifically.

    I do agree with you comment about lendingclub returns. They aren't charging high enough interest rates. I wrote about that in my January stats posting. Althouugh I kept the wording of the February posting neutral, that doesn't mean I agree with their choice of interest rates. The reason I post this data is so that investors can see how and at what rate loans go bad over time.