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Loan status migration / adjustment numbers - weird

Started by Peter, December 08, 2017, 11:00:00 PM

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Lending club has an "adjustment for past due notes" based on what it claims are "loan status migration over 9 months". You can flip it on and off, or customize it. I have always customized it to be more aggressive than what LC sets for 31-120 day lates and defaults.

Well I was looking today to see if I should adjust those settings again and I noticed that sometime since I last looked (over a year at least) Lending Club has updated it in a weird way.

Here are their current adjustments:

0% - Current
31% - In Grace
62% - 16-30 late
88% - 31-120 late
72% - default

Yes that's right, they are listing DEFAULT as having a lower 9 month loss estimate than 31-120 days late.

How is that even possible?


My guess is that these numbers are mechanically produced, without human thinking.  They take the payment history file, and run it thru a program that computers over the last X months what the statistics were, and then they pop those numbers in. 

I agree with you that for future predictive power, the present choices don't make much sense.  However, as a practical matter, there are very few loans in the "default" state, 'cause loans don't stay there very long.  That's probably why the mechanical process produces a flaky number, but it also means it won't change your account value much.


Apparently not all notes move from late through default to charged off. Some skip default and go from late to charged off.


wow my custom loss estimates I put around 10% higher than lending club's estimates. I haven't looked in awhile and now my estimates are lower than LC's. Must have been a ton more loss in the last 9 months than previously.

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