Lending Club update with a new test case from FOLIOfn

I can’t seem to get away from Lending Club. While working on the index measure in a previous post, I had another idea. I think a couple of the test case ideas are pretty good. One is the Zip/Grade case. This selects notes where past notes matching the zip code area (3 digits) and the grade and sub-grade of the note have historically returned more than 10% over the original purchase price. I found these were hard to come by when searching for new notes, usually only about 2-3 showed up each week.

I also feel the purchasing of notes on FOLIOfn where the note is near the end and the borrower’s payment performance on that note is pretty good is another way to select notes. It occurred to me one could combine these two approaches and purchase notes on the secondary market with the desirable Zip/Grades and a relatively short time to go might further refine desirable notes.

I modified my program to look for this combination. I learned a few things doing this. First, processing the exported available notes file is a challenge due to its large size. But I could overcome this since I’ve dealt with significantly large data files in the past. Second, the exported file did not include the zip area.  A tip from user “AnilG” in the lendacadamy.com forum indicated the way to approach this was to look at the past notes files from Lending Club. I then built a cross-reference file of loan ID’s and the zip area. With this and my table of returns by Zip/Grade I was able to select the desired notes.

This led to my 3^rd discovery. Some notes are listed more than once. I originally thought this was an error, but on further review found that it wasn’t. While the data lines initially looked alike, the asking price was different. Thus, different users are trying to sell the same note, but are asking for different amounts. Makes you kind of wonder how multiple investors decided to sell the same note near the same time. I’ll have to track this. In any event, of the 350,000 available notes I only found 5 of interest initially. So, I purchased theses and will put them in a new test case 8 portfolio. (I have subsequently added a couple more, but these are difficult to find, so I’ll only be slowly adding these in the future.)

Here is the status of all the cases.

Description	Current	Other	Fully Paid	Charged Off	Index
Test 1 End in 2017	17%	0%	78%	4%	96.0
Test 2 End in 12 months	80%	3%	18%	0%	96.8
Test 3 LC Picks	97%	0%	3%	0%	99.6
Test 4 Zip Grade	90%	10%	0%	0%	100.0
Test 5 By Percent	90%	8%	3%	0%	99.7
Test 6 By Funded	90%	10%	0%	0%	100.0
Test 7 Random	93%	3%	5%	0%	98.6
Test 8 FOLIOfn Zip Grade	100%	0%	0%	0%	81.5

Again, it’s early so the Index isn’t overly significant yet (particularly test case 8 because these notes are so new to me I haven’t received any payments yet). I’m not sure when I’ll update my Lending Club stuff again, but I’ll post on twitter when I do (@billlanke).