I have a lot of money in there
Hopefully you'll get some of it back.
LendingClub isn't the counterparty; even if they went bankrupt there would be procedures to move the loans to a different servicer.
LendingClub Loan Buyers Retreat After Shakeup; U.S. Probes
21–30 of 42 posts
Re: LendingClub Loan Buyers Retreat After Shakeup; U.S. Probes
#22I've used Lending Club on both sides of the marketplace (Lender and Borrower) and I really love the platform. So much easier than dealing with banks and the rates have always been fair. It's a shame they've made these missteps, but ultimately I think they'll come out stronger.
I use it as a borrower. I was able to get better rates than banks to do some consolidation. I like the platform from this side. I just worry who my loan will get sold to if they tank.
Re: LendingClub Loan Buyers Retreat After Shakeup; U.S. Probes
#23Earlier quoted context omitted.
True, I grouped them together since they are both semi unregulated alternative lenders. Google also had a stake/partnership with LendingClub.
Can you cite that claim of Google has a stake/partnership with LendingClub?
Are you too lazy to use the Google?
Re: LendingClub Loan Buyers Retreat After Shakeup; U.S. Probes
#24Earlier quoted context omitted.
Hopefully you'll get some of it back.
LendingClub isn't the counterparty; even if they went bankrupt there would be procedures to move the loans to a different servicer.
Nope. If you are retail lender, you are actually lending to Lending Club and not to borrowers. With this structure, you will be an unsecured creditor to Lending Club in the event of LC going out of business. I like to call it that you are buying Corporate Junk Bond from Lending Club with variable yield.
Re: LendingClub Loan Buyers Retreat After Shakeup; U.S. Probes
#25LendingClub is carrying more than $5 Billion in loans on its balance sheet [1]. That means $5 Billion still owed to Lending Club by retail borrowers. At an average of, say, $20,000 [2] per loan, that is 250,000 borrowers.
That same $5 Billion is owed by Lending Club to lenders. A portion of the lenders are institutions. The remainder are also at the retail level. I don't know the average amount loaned per investor, but I'd guess there are more than 100,000 lenders.
Contractually, through Lending Club in the middle, those hundreds of thousands of borrowers owe the hundred thousand lenders that $5 Billion, which will be paid off over (at most) 5 years.
As the middle-man, Lending Club collects about 1% in fees. That is $50 million in fees outanding.
If Lending Club ceases operation, that $5 Billion is still contractually owed by the borrowers to the lenders. In Lending Club's prospectus, under bankruptcy or if they become unable to process loan payments, the whole thing transfers to a trust, 'Portfolio Financial Servicing Company (“PFSC”)'[3] to continue collecting from borrowers and paying lenders.
This is shaping up to be a pretty interesting situation. If legal expenses, ballooning compensation and declining loan origination revenues eat up Lending Club's cash and drive them to bankruptcy, a bankruptcy court judge is going to have to decide on the fate of these hundreds of thousands of Lending Club customers.
Is there a precedent for this? Would a fail-over to PFSC definitely happen? Is it possible a judge could rule that money being paid back by borrowers is to be used to pay off LC stock holders, should shareholder lawsuits prevail?
[1] https://www.google.com/finance?q=NYSE%3ALC&fstype=ii&ei=vzI7... (select Balance Sheet)
[2] I don't know the actual average, but the max is $35,000. The average may be much lower since many loans are paid down below $10k already.
[3] http://kb.lendingclub.com/investor/articles/Investor/What-ha...
Re: LendingClub Loan Buyers Retreat After Shakeup; U.S. Probes
#26I've used Lending Club on both sides of the marketplace (Lender and Borrower) and I really love the platform. So much easier than dealing with banks and the rates have always been fair. It's a shame they've made these missteps, but ultimately I think they'll come out stronger.
I use it as a borrower. I was able to get better rates than banks to do some consolidation. I like the platform from this side. I just worry who my loan will get sold to if they tank.
I wouldn't too much about that. The new noteholder would still need to honor the provisions of the original agreement, and you could involve the Consumer Financial Protection Bureau if you ran into problems with the servicing of the note.
EDIT: I rescind my statement. If LC fails, both lenders and investors are going to have a bad time.
https://www.reddit.com/r/investing/comments/4jqaal/lending_c...
"From their prospectus: Our arrangements for backup servicing are limited. If we fail to maintain operations, you will experience a delay and increased cost in respect of your expected principal and interest payments on the Notes, and we may be unable to collect and process repayments from borrowers. We have made arrangements for only limited backup servicing. If our platform were to fail or we became insolvent, we would attempt to transfer our Loan servicing obligations to our third-party back-up servicer. There can be no assurance that this back-up servicer will be able to adequately perform the servicing of the outstanding Loan. If this back-up servicer assumes the servicing of the Loan, the back-up servicer will impose additional servicing fees, reducing the amounts available for payments on the Notes. Additionally, transferring these servicing obligations to our back-up servicer may result in delays in the processing and recovery of information with respect to amounts owed on the Loan or, if our platform becomes inoperable, may prevent us from servicing the Loan and making principal and interest payments on the Notes. If our back-up servicer is not able to service the Loan effectively, investors’ ability to receive principal and interest payments on their Notes may be substantially impaired."
Re: LendingClub Loan Buyers Retreat After Shakeup; U.S. Probes
#27I've used Lending Club on both sides of the marketplace (Lender and Borrower) and I really love the platform. So much easier than dealing with banks and the rates have always been fair. It's a shame they've made these missteps, but ultimately I think they'll come out stronger.
I use it as a borrower. I was able to get better rates than banks to do some consolidation. I like the platform from this side. I just worry who my loan will get sold to if they tank.
Why would you worry about who your loan gets sold to as a borrower? If I were an investor on the platform I would be much more worried.
Re: LendingClub Loan Buyers Retreat After Shakeup; U.S. Probes
#28LendingClub is carrying more than $5 Billion in loans on its balance sheet [1]. That means $5 Billion still owed to Lending Club by retail borrowers. At an average of, say, $20,000 [2] per loan, that is 250,000 borrowers. That same $5 Billion is owed by Lending Club to lenders. A portion of the lenders are institutions. The remainder are also at the retail level. I don't know the average amount loaned per investor, b…
> the whole thing transfers to a trust, 'Portfolio Financial Servicing Company (“PFSC”)'[3] to continue collecting from borrowers and paying lenders.
The "paying lenders" part is partially correct. Only the Lenders that are part of LC Trust I, Lending Club Advisors (LCA), and one another entity (name escapes me at the moment) will get paid as these entities are Bankruptcy Remote Vehicle (BRV). As I mentioned in another comment, the Retail Lenders don't have any BRV protection so they will be considered unsecured creditor of Lending Club.
As debt is senior to equity, debt holders will get paid before equity holders. The unsecured creditor is subordinate to any senior debt holder, the retail lenders will be last one to be paid before equity holders. Source: Read the SEC Filings - prospectus and 10-K.
Also from your PFSC link:
"If the underlying loans are determined to be part of Lending Club’s bankruptcy estate, PFSC may not be able to make payments on the Notes."
Re: LendingClub Loan Buyers Retreat After Shakeup; U.S. Probes
#29Earlier quoted context omitted.
These stock grants will vest over time. The retention bonuses pay out in a year. A lot can be done to turn the ship around in a year. If they don't, the stock grants (depending on issue price) will be worth a lot less than originally issued, and they'll mainly have a highly taxed bonus. The grants are to prevent opportunity cost of leaving from being considered. If they turn it around, the stock grants will be easily…
They're stock grants not stock options. They're worth something even if the stock goes down (except to 0).
I'm not sure what you are trying to correct or clarify in the comment you are replying to. Did you mean to reply elsewhere?
Re: LendingClub Loan Buyers Retreat After Shakeup; U.S. Probes
#30Earlier quoted context omitted.
LendingClub isn't the counterparty; even if they went bankrupt there would be procedures to move the loans to a different servicer.
Nope. If you are retail lender, you are actually lending to Lending Club and not to borrowers. With this structure, you will be an unsecured creditor to Lending Club in the event of LC going out of business. I like to call it that you are buying Corporate Junk Bond from Lending Club with variable yield.
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