P2P-Banking.com

Lending Club announced today that they have closed another funding round. Excerpt from the press release:

… closed a $12 million Series B round of funding. Morgenthaler Ventures led the round and is joined by existing investors, Norwest Venture Partners and Canaan Partners. Rebecca Lynn, a Morgenthaler Principal, is joining Lending Club’s board of directors.

Lending Club also announced today that it has added Pamela Kramer as Chief Marketing Officer. Ms. Kramer is an established marketing veteran … . She was most recently Chief Marketing Officer of MarketTools, Inc and, before that, spent 9 years in leadership roles with E*TRADE Financial … .

As P2Plendingnews.com has researched Lending Club has invested 2.4 million US$ of its own money to fund loans since the relaunch in last October. The total volume of funded loans is approx. 10 million US$, that means that Lending Club funded about 24% of all loans itself.

The data is from weekly sales reports that Lending Club files with the SEC. The sales reports look like this and give details on each loan funded.

More details and numbers in the article (recommended reading) by P2Plendingnews.com.

While this may be contrary to the “pure” idea of peer to peer lending my take on this is:

1. I see it as a positive development. By using own money to fund loans Lending Club demonstrates their belief in the business model and shares the same risk it expects lenders to take. By the way: There are ongoing discussions at MYC4 about changes that could lead to MyC4 and MYC4 providers to share more risk in funded loans.
2. By co-funding loans Lending Club adds continuity. When supply of money by lenders is low, Lending Club co-funds more. That way the demand by borrowers can be served without interruptions.
3. However since due to SEC filings very detailed information on the funded loans is publicly available, the explanation of Rob Garcia that the download data was removed due to privacy concerns (see previous post), seems stale.
4. P2Plendingnews questions, if Lending Club can continue with co-funding for running out of funds. On the other hand, Lending Club earns interest from the funded loans and can sell the notes any time on the secondary market (that would explain why so many of the notes there are offered for sale immediately after the loan was funded).
5. One further and important aspect: Only residents of 25 states can participate as lenders on Lending Club directly. However on the Note Trading platform residents of all but the states Kansas, Maryland, Ohio, Oregon, Texas and Vermontand the District of Columbia can buy notes.
   That means by co-funding loans and selling part of their investments on the Note Trading Platform Lending Club enables a larger target audience to use their service.

Please share your opinion by commenting here or in the Lending Club forum. Thank you.

Recently I noticed two changes on p2p lender’s Lending Club website.

On the statistics page the link to download the loan data was removed. Before it was possible to download the complete loan data since inception of the service. Furthermore the predefined setting for the parameter “Loans issued from” is set on March 1,2008 now. That means, if you look on the page and do not change that parameter manually you see how loans performed that were issued between March 1, 2008 and today. Older loans issued between June 1, 2007 and Feb 29, 2008 are not included in the displayed results.

When I noticed that, I was reminded of what Prosper did with it’s statistics. Prosper segmented it’s loans (e.g. prosper select index) and cited only results for better performing segments in press releases. Furthermore the predefined values on Prosper’s statistic page, were set in a way that lowered the late payments and default ratios compared to an average over all Prosper loans.

But Lending Club had successfully positioned itself with transparency a core value in the past, so I asked Lending Club to comment on the reasons for the changes.

Rob Garcia, Director Product Strategy told P2P-Banking.com:

This is a temporary situation. We chose to take down the files due to privacy concerns raised by our customers. We are working to address these concerns in a way that continues to provide full transparency to platform data, while protecting the privacy of our customers….

On the setting of the parameter he stated:

The default setting for the statistics page is a year. So since we are now in March, the “From” date is defaulted to March 2008. This is to show the most relevant annualized indicators for the last year. Users can then change the “From” and “To” dates to explore the indicators for a specific time frame they may be interested in, including from inception (June 1, 2007). We did this based on numerous email inquiries from lenders asking for annual default rates instead of a general default rate since inception (so that they can compare annual defaults to annual interest rates to get actual net returns). We’re looking at tools to make that calculation easier…

Yesterday Lazy Man wrote about his observations on how Lending Club reports risk. The posted screenshots show that interpretation of the risk figures is not obvious under certain circumstances.

Found this today. Someone using Lending Club’s new Note Trading Platform seems to speculate that a bulk buyer of notes might overlook the added zero in the value?

Retrieved Nov. 3rd, 2008 - some columns have been removed to allow better overview.

ABC interviewed Renauld Laplanche of Lending Club on ABC Money Matters. Laplanche says in the last 10 days over 1 million US$ in loans were funded and states that the default rate has been lower than 2% over the last 18 months. Watch the video.

A day after the start of the secondary market (see: “Lending Club allows lenders to trade their investments“) of Lendingclub.com, today 3 loans are offered for sale. I doubt that these Lendingclub loans will find a buyer, since they are all more then 60 days late and the discounts of the asking price versus the outstanding interest and accrued interest are rather small (13.64% to 23.13%). But maybe someone will purchase the first note (it’s only 20 US$) just to experience and test the process.

There have also been reports by lenders, that do not fit the new requirements, but were able to sign up at FolioFn, raising the question if these lenders can buy notes even if they are prohibited from lending themselves.

Lendingclub.com has introduced a secondary market for lenders. This is a major step, because one disadvantage for lenders in p2p lending was the lack of liquidity. Once the money was lend it was tied up (apart from repayments) until the end of the loan term (typically 36 months and more).

Through it’s secondary market - called Note Trading Platform Lendingclub allows lenders to offer their loans (or more precisely notes representing these loans) to other lenders.

Sellers list Notes that they would like to sell and enter an asking price. Buyers browse Notes that are available for sale, review payment history and the evolution of the borrower’s credit score, and buy Notes at the asking price. Buy orders received before 4pm Eastern time will generally settle same day, while buy orders received after 4pm Eastern time will settle next day.

Information about the Notes
Each listing contains the Note’s interest rate, issue date, outstanding principal, accrued interest, number of payments left, payment history to date, and the variation of the credit score of the underlying borrower since the issue date. Note, however, that the Notes are not “re-graded” over time, so you should not rely on grades assigned to Notes at the time they were issued to assess the current risk of a Note.

The Lending Club note trading platform is operated by FolioFn, a registered broker dealer. Foliofn charges to the seller a trading fee equal to 1% of the transaction amount. There is no fee charged to buyers.

Right now there are no notes offered for sale.

As reported in the previous post, Lendingclub.com is open for new lenders. However lenders have to meet two requirements:

Resident in one of 15 approved states:

The Notes are presently being offered and sold solely to residents of the states of Colorado, Connecticut, Delaware, Florida, Georgia, Illinois, Louisiana, Minnesota, Mississippi, Montana, New York, Rhode Island, South Dakota, West Virginia, and Wisconsin, and are not presently being offered or sold to residents of any other state, the District of Columbia, any other territory or possession of the United States, or any foreign country.

Compliance with Financial Suitability Standards and Investment Limits

I confirm that I (a) have an annual gross income of at least $70,000 and a net worth (exclusive of home, home furnishings and automobile) of at least $70,000; or (b) have a net worth (determined with the same exclusions) of at least $250,000. In addition, I agree that I will not purchase notes in an amount in excess of 10% of my net worth, determined exclusive of my home, home furnishings and automobile.

I think Lendingclub probably will be adding more states to the list of approved states over the next months.

P2P lending service Lendingclub.com, which was in a quite period not accepting new lenders and bids from existing lenders, today announced that it completed it’s SEC registration. LendingClub is now resuming it’s full p2p lending service and again accepting new lenders.

See: Lending Club completes $600 million SEC filing

More to follow…

On June 20th, Lendingclub.com filed a registration statement with the SEC to issue up to 600 million US$ in Member Payment Dependent Notes. The notes will be backed by loans and sold to lenders. The process for lenders remains pretty much the same as before the quiet period, only the legal setup will change to comply with regulation.

Link to SEC filing of Lending Club

Press release by Lendingclub regarding the SEC filing

Netbanker extracted some interesting data from the 100+ page Lendingclub filing.