Lend Academy is an interesting website where investors in Lending Club and Prosper get together and discuss issues. From my time on the Lending Club investor section the the forum, I have been impressed by the detail and sophistication of the analysis that has been presented. These people do not seem to be casual investors, but they are very serious about their investment and what they expect to achieve.
I recently received my October 2016 statement and walked through the XIRR calculation for the month. It was remarkable how few purchases I made during the month. It was especially so since nothing showed up on the screen during the last two weeks. I have two loans that have a status of “In Grace Period” and two loans that have a status of “Late”. Still, 92% of my loans by dollar amount have a status of “Current”.
The number of loans that have moved into a non-Current status has been the subject of a few posts on the Lend Academy forum. Some are speculating this could be the precursor of a recession. Others wonder if stacking is becoming more common (stacking is a situation where borrowers obtain money from multiple sites and either don’t pay at all or immediately go onto a payment plan). I don’t have an opinion on either, but I do worry about the resilience of borrowers if a slowdown in the economy is coming.
I opened my account in July. The XIRR calculation did not work well in the opening month so I discarded the result. For the month of October 2016, my XIRR is 4.80%. This is above August’s result but below September’s result. I do like this result since I am only 45% invested. If I was 100% invested in similar grades, I would have expected to see an approximate return of 9.60%. That would have been well above my target rate of 8%.
With the slowdown in the secondary market, I do not have much confidence in returns for November being much higher. With the grade composition likely being stable, the majority of the increase in returns will need to come from a higher investment percentage. That means continuing to purchase from the secondary market.
I did have a very curious situation arise during the month. On the first of November, I downloaded the notes from 2013 and ran a statistical analysis on the status of several characteristics of the loans. With the characteristic of “Purpose”, no individual item was statistically better than others. “Credit Card Refinancing” has been a stand out every month since I started in July. There have also been others that showed significant differences, but this is the first month where all of the “Purpose” types showed the statistically same outcomes.
It is far too early to consider using 2014 data. I just ran a test and 54% of the grade A loans are still open. That’s simply far too many to know the final percentage that will be Paid Off versus Charged Off.
I am certain there will be many more posts on the changes occurring in the Lending Club portfolio. Most of the knowledge I have about it will come from Lend Academy. The company will be releasing their quarterly results on Monday. With the stock price hovering around $5, I am hoping there will be good news. That price is a cut off point for some funds to invest. Maybe the price will go up and I can set aside immediate concerns about the financial viability of the company.