Saturday, September 5, 2009

Lendingclub - 09/01/2009 Late Loan Stats Update

These charts show statistics for the performance of all loans. 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 my charts of loan performance. That's because the volume of loans at Lendingclub is still too low to get really good stats.

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

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.

Loans originated during the first few months of lendingclub's operation have performed very poorly. Oct, Nov 2007, and Jan 2008 have had about 15% of loans go bad during the first year. This is similar to the performance of loans.

Loans originated in later months have performed much better. This gives investors some hope, but...

Why have Lendingclub's later loans performed better than earlier Lendingclub loans? It seems that Lendingclub management must have learned some things and improved their verification criteria. Perhaps they learned how to filter out more of the identity theft or professional deadbeat borrowers. Unfortunately, I don't know what they changed. That makes it difficult to have faith that the improved quality of loans will continue.

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